Is mortgage-freedom your goal? Tackle it in these three ways.
Not everyone can visualize a future without a mortgage. But, Sean Cooper did. Before he was 30, Sean eliminated his mortgage on the home he purchased in Toronto nearly eight years ago. In our latest episode of LA TV, Sean shares the three most effective strategies to burn your mortgage.
Accelerate Your Mortgage Payments: There’s a common misconception about payment frequency. Many people think that how often they make a mortgage payment plays a larger role in interest savings than it actually does (in fact, it plays a small role). It’s the accelerated alternatives that save you the big bucks. Paying accelerated payments, which happens to be just slightly higher than normal, on a biweekly schedule that matches your payday, is the most painless way to budget for the higher payment. You won’t even realize you’re making higher annual payments (it’s probably a good thing, as you might not choose this option if you did).
Make Lump-Sum Payment: Make lump-sum payments whenever you can afford to (most lenders let you do this on one of your regular payment dates during each year of the mortgage term) by tossing “found” money—tax refunds, bonuses, cash gifts—at your mortgage. Look for new ways to save money: brownbag your lunch, switch to a less expensive cell-phone plan or carpool, and put the money you save toward a lump-sum payment on your mortgage. Lump-sum payments go straight toward principal, saving thousands of dollars in interest and shaving years off your mortgage amortization.
Double-Up Your Payments: Still have some extra cash that you’d like to toss at your mortgage? Some lenders let you double up your regular mortgage payments. You can often do this on any of your regular mortgage payment dates. When you double up your payments, similar to lump-sum payments, the extra payment applies directly to your principal.
Sean released his bestselling book Burn Your Mortgage in 2017. It is available at all major bookstores.
Related content: Choosing a Mortgage