Homeownership, the ultimate American Dream! According to the National Association of Realtors, 5.51 million existing homes were sold in 2017. And most of us want to own our own homes free and clear. Saving on interest payments and cutting down the years and years of payments is a great idea. However, implementing the right strategy to pay off your mortgage early is key and there are a few ground rules you’ll want to follow:
- Check with your mortgage company first. There may be a process to follow when making a prepayment. Also, some states allow lenders to charge prepayment penalties, which means it could actually cost you more to pay off your mortgage early.
- Include a note on your extra payment directing the additional money to be applied to the principal balance and not next month’s payment.
- You can, and should, do this yourself. No need to buy a program from anyone! Dave Ramsey has a great mortgage calculator that can help.
One of my favorite podcasts is the Brian Buffini show. Brian is energetic, smart, entertaining and just fun to listen to! Here’s a link to his show entitled Getting the Mortgage Monkey Off Your Back.
7 Strategies from the Brian Buffini Show.
- Implement a bi-weekly payment plan. Pay half your monthly payment every two weeks. Those 26 half-payments will add up to an extra payment each year!
- Match next month’s principal this month. Look at your payments and send next month’s principal in addition to this month’s payment. This practice shave years off your mortgage and saves a ton of interest!
- Make one extra full payment each quarter. You’d be shocked how many years this can take off your mortgage!
- Cash Lump Sums. Did you receive a bonus at work? An inheritance? A raise? Unexpected cash can be put directly to your principal balance.
- Refinance to a 15-year loan. The payments might be bigger but you’ll pay off the loan in a fraction of the time. Consult your mortgage professional with questions.
- Pay a little more each month. Divide your mortgage payment by 12 then add that amount to your monthly payment for a year. That’s equal to one extra payment a year!
- Every little bit you can find. Savings from cutting back the daily stop at Starbucks? Direct extra money saved to your principal.
If you want to implement any of these strategies, I recommend talking with Jeremy McMichael at A Plus Mortgage Solutions before you do anything. And if you’re looking for a new home this spring, here’s an update on the Mechanicsburg market: In the last 6 months, there were 72 homes that SOLD in a price range of 250,000-350,000 in the Mechanicsburg School District. There are currently 20 homes FOR SALE in a price range of $250,000-350,000 with an average market time of 35 days. There is still an abundance of new construction taking place and being developed in this community as well.