Budgeting Your Project

Mortgage Elimination Programs

Should you own your home, chances are good your biggest monthly invoice is the mortgage payment. Imagine how much you could save monthly expenditures if you didn't have to make that payment anymore. Mortgage financing programs aim to get you there. What they all have in common is the practice of paying the principal amount of your loan sooner compared to amortization schedule requires. You can pay off your loan one year before or 10 years earlier–or any time schedule you select, depending on how far and when you pay down the principal.

Biweekly Payment Strategy

Many lenders and private companies offer a biweekly mortgage program, which works in one of two ways. If offered right by your creditor, it's probably your payment will go directly to reduce your loan every fourteen days. This causes the principal portion of your loan being paid sooner because one-half of your former payment is paid fourteen days before. This method also contributes to making two extra payments per year since there are 26 annual payments instead of 12 monthly payments. But if this application is supplied by a company unrelated to a creditor, more frequently than not it only hangs to your first biweekly payment and then pays your monthly mortgage once you send in the second. The creditor still ends up getting two extra payments per year, but you’ll not also benefit from each of the biweekly payments decreasing your principal throughout the year. Both the lender and the private servicing firm cost you a fee for switching to a biweekly payment program.

Create Extra Payments

There's really no good reason to pay anybody to help you pay down your mortgage. Unless you’ve got a very rigid prepayment penalty that prohibits extra payments–that is unlikely because most prepayment penalties prohibit only a 20 percent or more decrease over the first few years of the loan–you’ll pay down your mortgage by yourself. Continue to create the normal monthly payments, and then simply choose when to make extra payments and how much you want them to be. You can do this in some months and not others, and you can alter the amounts of the extra payments at will. The earlier you make extra principal payments the greater the effect on decreasing the total interest you will pay over the complete course of the loan, and also just how quickly it will be paid off entirely. Use a mortgage calculator, available online, that has both an extra payment attribute and an amortization schedule to calculate several variations of extra payment plans to ascertain how much money you'll save and how much earlier your loan will be paid back. To run the calculator with your current loan info. Consider the bottom of the amortization schedule to learn the date you'll pay off the loan and the total interest plus principal payments demanded. Then compare these figures with different payment plans to ascertain the best method to pay off your loan earlier.

Reverse Mortgage

If you’re 62 or older and possess a small mortgage–ideally one that is a lot less than 50% of the value of your residence and below $200,000 to $300,000–you can obtain a reverse mortgage to pay off your existing mortgage. Yes, a reverse mortgage is still a mortgage, but it doesn't need any obligations whatsoever while you stay living in your home. Rather, the loan is completely repaid only once you move, sell the house or die. What equity remains in the house after repayment of the inverse mortgage belongs to you or your heirs. If your goal is to live without mortgage obligations in your golden years, but you don't have the time or way to completely pay off your existing mortgage, this could be your ticket.

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