When you receive a mortgage, typically the numbers are so high that paying it off doesn’t seem like an attainable goal. But if you are intent on paying off the largest loan you will likely ever receive faster than anticipated, then you just need to make smart decisions at the inception of your mortgage loan. Interest on your mortgage loan is taken out of your payment prior to applying money against the principal loan. The first few years’ worth of payments are largely made up of interest repayment.
The best way to pay off your mortgage faster than anticipated is to make payments directly against your mortgage while bypassing the interest owing. You can do this in a few different ways.
Pay Your Mortgage at an Accelerated Rate
Some mortgages allow for extra payments to be made. Applying an extra $100 a month as additional payments can really accelerate the rate at which your mortgage is paid off. Depending on the size of your loan, you can possibly shave years off your amortization period.
Make a Lump Sum Payments
At times, mortgages can also provide for lump sum payments to be made directly against the principal once a year. This is a tremendous opportunity to significantly lower your mortgage loan amount and save you interest at the same time.
Choosing the Right Payment Frequency
When you begin the mortgage process, there are decisions to be made about your payment frequencies. You have the option to pay monthly or bi-weekly. Monthly may be the desirable option if your lifestyle requires more time in between payments. However bi-weekly payments allot for more payments to go through in a calendar year. This means that some of the payments are applied directly against the principle. This means you pay down your mortgage faster and save interest as a result.
Choosing the Right Amortization Period
Choosing an amortization period will also affect the amount of interest you will be responsible for paying. The longer your amortization period, the lower your monthly payments will be. On the other hand, your term will be longer resulting in higher interest paid overall. If you have the means to make higher monthly payments, then perhaps a shorter amortization period should be discussed. Although your monthly payments will be significantly higher, the interest paid out at the end of the term will be significantly lower.
There are many factors involved with obtaining a mortgage and the whole process can seem overwhelming. It is best to seek the advice of a mortgage broker from The Mortgage Advisors to ensure that you get the right mortgage for your financial situation and for your future goals.