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Back to Basics, Tips For Paying Your Mortgage Down to Zero

Mar 3, 2009 Real Estate Properties

Homeownership is one the American dreams. It is easy to mismanage your planb and end up never paying off your home. With the proper plan the ones who want to end up with no payment can.

If your mortgage is about to adjust and you are still in good standing but are looking for a long term financing solution you can refinance into a fixed loan that you can start paying down your principal.

If your main goal is to have no mortgage by the time you retire there are many products that you can look at. There are 10 year, 15 year, 20 year, and 30 year fixed loans.

30 year fixed loans are great but if you pay just what you owe each month you will have a mortgage for 30 years. If you dont feel comfortable getting into a shorter term loan you can always pay more towards your loan each. Even an extra $500 will be applied directly to your principal balance. What will happen is payments on the back end of your loan will be removed which saves you interest. You will always have to pay the total principal balance on your loan but the less time it takes you to pay off the less interest you have to pay. Makes sense right?

As an example if you looked at your monthly payment on a 15 year fixed and then your payment on a 30 year fixed your payment is clearly higher on the 15 year fixed because the term of your loan is half as long. If you can afford the 15 year payment but arent sure you want to be obligated to paying that much you can take a 30 year fixed loan and still pay the same as you would as with a 15 year fixed loan. The end result is true homeownership in about 16 years versus the 15 years but with the flexibility to pay the 30 year payment if need be.

If you follow this plan you will save a tens of thousands in interest that same way to would if you got a 15 year fixed from the start.

If you have extra money to pay off your house but not quite enough to get into a 15 year fixed this is a great plan to shorten your overall loan.

Just because rates are great does not mean you should run out and get a new loan. If you have been in a fixed loan for more than 5 years you have already paid the majority of your interest on your loan. Refinancing, even at a lower rate will cause you to restart the interest cycle again and extend your loan out another 5 years. The majority of interest in a mortgage in paid in the first 5 years. If you are in an adjustable rate mortgage or an interest only mortgage and can afford a little higher payment, now is the time to strike. Rates are great.

Tags: Budget, family planning, finance, loan, mortgage plan, Paying off your mortgage, Real Estate, Real Estate Properties, when to refinance