Increase Your Mortgage Payment and Made an Early Payoff
A lot of mortgage borrowers are certainly looking for extra payment plans and refinancing schemes that can help them pay off their debt ahead of schedule. Many people want to make an early mortgage payoff. They want to get rid of their loan as quickly as possible. Being debt-free is absolutely great, so an early payoff can be a good option for people, who do not want to have debt anymore and want to pay off a mortgage early. However, is this always a smart financial decision? That depends on many different factors. This article will try to help you find out if early mortgage payoff is a good idea for you and your financial situation.
Do You Want to Save Your Money or Reach Financial Freedom?
With refinancing your mortgage scheme or with an early payoff, you can reach financial freedom and be debt free faster. This is one of the main reasons, why people decide to pay off a mortgage early. On the other hand, sometimes is better to have some extra savings in reserve for unexpected situations than being complete without a debt. What, if you suddenly lost your job? So even if you decide to pay off a mortgage early, do not forget to set some money aside for emergencies!
|Payment||Number of pay ments||Total payment||Interest||Interest Saved||Paid off in mon ths||Date paid off|
MonthlyThe normal monthly annuity is calculated using the simple method for the calculation of interest. It is paid once a month or twelve times a year.
Acc MonthlyWith accelerated monthly annuity payment is calculated so as to add to the monthly annuity of one-twelfth (1/12). In this way you can achieve that with the payment of twelve annuities pay 13 normal annuities. We pay monthly or 12 times per year.
$847.63=Monthly+(Monthly/12) You pay 12 times a year
Semi-monthlyThe amount of the annuity is one-half of the monthly annuity. Since you pay twice monthly pay less interest, but the savings in this mode is small. We pay to the 1st and 15th of the month or 2 and 16 … or 14 and 28.
$391.22=Monthly/2 You pay 24 times a year
Bi-weeklyIn the Bi-weekly accelerated mode to calculate an annuity equal than semi-monthly (monthly installment is divided by two), but we pay every other week, about 26 times a year, which means that in one year we pay more than thirteen monthly annuities.
$361.12=Monthly*12/26 You pay 26.07 times a year
Acc Bi-weeklyIn the Bi-weekly accelerated mode to calculate an annuity equal than semi-monthly (monthly installment is divided by two), but we pay every other week, about 26 times a year, which means that in one year we pay more than thirteen monthly annuities.
$391.22=Monthly/2 You pay 26.07 times a year
WeeklyIn the weekly mode the return of the loan installment is calculated so, that the monthly installment multiplied by 12 and divided by 52. We pay every Monday or every Tuesday … or every Friday.
$180.56=Monthly*12/56 You pay 52.14 times a year
Acc WeeklyWith accelerated weekly repayment loan installment is calculated by dividing the monthly installment 4. We pay every Monday or every Tuesday … or every Friday.
$195.61=Monthly/4 You pay 52.14 times a year
In addition, mortgages can have a relatively low-interest rate, so borrowing money that way is quite cheap. Mathematically is often better to invest your savings than use them to pay off a mortgage early, but emotionally is better to be without a debt as soon as possible. Being in debt can cause you a lot of stress, so it is good to know, how you can pay off a mortgage early and become debt-free.
A Prepayment Penalty and Extra Costs
Early mortgage payoff can be the right option for you, but your lender may not agree. Do not forget that some mortgage schemes have special terms and prepayment penalties that can cause you high additional costs. Before you make any extra payments to your principal, double-check your mortgage contract. You have to be sure that there are no prepayment penalties. If there is a prepayment penalty, carefully read your contract again and do not forget on a fine print. In some contracts, prepayment penalty becomes smaller after a certain period of time or there are some other options that can help you lower the penalty. Call your lender and try to negotiate for the option that suits you best. Sometimes is worth to pay an even very high prepayment penalty, if you calculate that this is the fastest way to your financial freedom.
Make Some Extra Payments and Pay Off Mortgage Early!
Paying off your mortgage early can have many advantages if you choose the right extra paying plan or refinancing scheme. You have to compare different options before you choose to pay off a mortgage early because there are differences between them. Use the mortgage payoff calculator and find out, how your extra payments can save your money and help you pay off your loan ahead of schedule. Paying some extra money to your principal can shorten the length of your mortgage term. In case that you have a fixed-rate mortgage, you can simply add a fixed amount of money to your principal every month.
On the other hand, fixed extra payments with the adjustable-rate mortgage can save your money but do not usually shorten the length of the mortgage term. So it is very important, what kind of mortgage you want to make a payoff. Extra payments with the adjustable-rate mortgage have to be precisely calculated because the ARM is recalculated every time the interest rate changes. You have to consider this when you calculate your extra monthly payments if you want to pay off a mortgage early. A mortgage calculator can be a great help with that.
Calculate Your Options and Make the Best Decision!
If you are thinking about refinancing your mortgage and increase your monthly payments, you have to ask yourself, what are the pros and the cons of this step. You have to calculate your savings and costs and find out, which option suits you best. Mortgage payoff calculator can help you with your decision! For every home loan or mortgage, different payoff schemes are available, but not all of them can save your money. That is why it is important to know the differences between them. With the use of mortgage payoff calculator, you should easily answer the question, if the mortgage payoff is financially beneficial for you.