More and more families are able to acquire a house out of a mortgage. You can now buy a home with little down payment, as long as you’re financially stable. But before you start living one of your American dreams, one needs to consider several factors – one of the most vital is your repayment plan.
Before you can enjoy your role as a homeowner and even before applying and getting approved for a Texas mortgage, you must already have a plan on how to repay your mortgage. While the idea of repaying your lender in full may seem pretty daunting, it is not impossible to pay it off earlier than your mortgage terms.
If you’re seriously considering paying off your home loan early, it is essential to check with your lender first. You wouldn’t want to have prepayment penalties just because you paid extra. Once settled, ensure to include a note stating that you wish your extra payment applied to your principal mortgage balance. Otherwise, your lender will think the excess amount they will receive will be your payment for the following month.
Here are some of the fool-proof ways to pay your mortgage early.
Consider Putting 20% Down Payment If Possible
By paying the standard 20% down payment, you won’t only dodge Private Mortgage Insurance, but it can also save you a lot in terms of interest rates. The lower interest rates and monthly mortgage you need to pay, the better your chances of repaying your lender in no time.
Pay Extra Principal Payments
Homebuyers can make extra payments, and your lender can mark it as a principal only payment. This means any excess payments you make monthly will pay for the principal amount instead of deducting it from your next mortgage payment. By making extra principal payments, you get to save yourself from interest charges. You’d be surprised how much of your little payments can add up and make an impact on our principal mortgage fees.
Make Biweekly Payments
Homebuyers will need to pay a monthly mortgage fee every month. By making half-sized payments twice in a month, it will result in 13 full-sized monthly mortgage payments instead of 12 since you’d be paying half of your payments every two weeks. This means you’re able to make extra payments even if it has nearly the same impact on your budget.
For example, your monthly statement including interest fees is at $2,000. Your biweekly payment would be $1,000. Make sure to ask your lender if they are open to biweekly payments. If not, you can try opening a new bank account, deposit your biweekly payments and automatically pay for the monthly mortgage every time you make second deposits.
Refinance Your Mortgage
Let’s say your original mortgage is a 30-year loan. You can opt to refinance and apply for a shorter loan like a 15-year loan. Doing so will enable you to pay it off faster plus you get to enjoy an even lower interest rate. Since you’ll repay the loan more quickly, you’ll also pay a lot less when it comes to interest fees. If, however, you feel that the new monthly payments are too much for your budget, you can opt for a 20-year loan instead.
By putting down 20% down payment, refinancing your mortgage, making extra payments and paying biweekly, you can easily pay off your loan earlier than the stated in your mortgage term.