While there’s a debate as to whether or not you should pay your mortgage early, the fact is that taking years off your home loan can save you thousands of pounds in interests and charges. Although most mortgages are repaid over a 25 year period, you can slash that in less than half and become mortgage free in 10 years or less. Here’s how.
Understand How Mortgages Work
You can really do this if you first understand how mortgages work. Your payments can be broken down into principal and interest. Usually, you pay a specific amount every month that reduces the overall balance as time goes by. As a result, although most of your initial payments goes towards the interest, as you keep paying each month, more and more of the money goes towards the principal as you would find out with a mortgage calculator. The bottom line is to have more of your payment offset the principal mortgage, and get lower rates where possible.
Do Your Calculations
You should explore your options and work out possible ways by which your mortgage can be financed. Although the traditional mortgage payment is split into 12 months each year, you could opt for an accelerated bi-weekly or weekly payment which could significantly draw your mortgage-free day closer. You could also decide to pay more than the minimum mortgage payment. Adding some extra Pounds each month, can go a long way.
It also helps to put in whatever you can into paying the mortgage. If you get an income raise, you could channel it into your mortgage payment, which would go directly to your principal payment. If you get some extra unexpected cash in the form of a gift, tax refund or even a lottery win, make a lump sum payment. If you have some money left at the end of the month from your budget, by all means apply it to your mortgage. Lump sum payments greatly reduce your interest and draw you closer to being mortgage-free.
Set a Goal and Keep Track
Paying off your mortgage within 10 years is all about making sacrifices in the short-term that will eventually pay off. You need to be committed about it. Set a realistic goal especially if you have any other expensive debts and map out a budget. In all, remember to check your mortgage deal so that you know how to time payments as interests rise and fall.
Out with all the advice that has been shared above, working your way out of your mortgage quickly comes down to a very simple thing, from which everything else follows. It’s about having a driven frame of mind to be able to achieve the goal of not worrying about mortgage debt later in life. This is the part that most people will find difficult, and would go some way to explaining why there are such big problems with housing today.
Several years down the line, it can be all too easy to abandon your original plan and spend your money out with your mortgage. Tempting as this may appear, you’ll only find yourself with the same debt or worse further down the line.