Make One Extra Mortgage Payment Each Year
Everyone looks forward to the day they finally finish paying off their mortgage and start enjoying the returns of the investment. You probably know that the quicker you can save and meet your repayment commitments ...
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Shorten Your Mortgage
Everyone looks forward to the day they finally finish paying off their mortgage and start enjoying the returns of the investment. You probably know that the quicker you can save and meet your repayment commitments, the quicker you will see your investment pay off.
It's possible to shorten the time until your mortgage is paid off and reap the returns sooner. You can make one extra mortgage payment each year to quickly shade off a couple of years of interest payments. The major key to making one extra payment is your motivation supported by the following methods ...
Understanding how one extra payment can impact your mortgage.
You can find out why making an extra payment each year on your mortgage can save you a lot of interest and many years of payment by using a mortgage calculator. Lets go through your first payback commitment on a $150 000 mortgage at an interest rate of 4%. A standard payment schedule will have the mortgage paid out by 2047 if all payments are honored. However, if you could fit in an extra payment of about $716 every year, you could easily shave off 4 years of mortgage payment and see the mortgage off by 2043! What if you made two extra mortgage payments?
Here's how to save up for the extra payment.
Now that you see the impact of making just one additional payment on your mortgage, you can be motivated to come up with strategies to help you save up for the extra payment. Here are some steps that can lead you all the way:
- Take a look at your current budget
The first thing you want to do is to review your monthly budget, take a look at everything from credit statements, savings, debts and all your spending. This will give you an insight into your finances. Knowing the ins and outs of your financial standing gives you a hold on how you can better manage your spending to maximize savings. Tweaking your spending and saving habits can be helpful in finding extra income to contribute towards your extra mortgage payment.
- Setting achievable goals
Setting big ambitious goals can overwhelm you very fast. To make some strides towards that extra payment, you need to set goals that you can meet. Start off with the easiest saving goal that you can achieve. If you know you can save $15 per month then start there and work to meet that goal each month. Once you have met that goal for a couple of months, you can increase it just a bit. The idea is to keep increasing it bit by bit until you get to a level that is challenging but achievable, in other words, your sweet spot.
- Secure the savings
It is very easy to get tempted and use the extra savings for something else like a vacation or a night on the town. If you want to meet your extra payment you have to find a way to secure the extra savings such that you have no access to them no matter the temptation. You can set up a plan with your bank so that the extra savings can be automated into a savings plan that you have no access to until the mortgage payment is made.
Continually check in on your finances.
Whether you plan is working or not, it is important to keep on checking your finances. You could set a “money date” each month to go through them, because the more you know about your financial position, the better you will be at optimizing your savings plan so that you can meet that extra mortgage payment.
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