By Sally Herigstad • Bankrate.com
If you want to pay off your mortgage early, you’ll find plenty of experts recommending ways to do it. All strategies work, but you’ll find some methods of paying off your mortgage are safer, faster, and more painless than others. Compare these ways you can pay off your mortgage early, starting with the simplest and moving toward the most complex.
1. Just Pay More – If you pay a little more principal, you get a bonus. The lower your principal gets, the more every payment from then on is applied to principal, as less goes to cover interest expense.
2. Refinance with a shorter term mortgage – You can refinance into a mortgage for 10, 15 or 20 years, but 15-year mortgages are the most common. Your payments will be higher on a 15-year loan, but perhaps not as high as you think.
3. Switch to biweekly payments – Biweekly payments take advantage of the fact that there are 52 weeks in the year and 12 months. If you pay half your regular mortgage payment every other week, you’ll have made 26 half-payments, or the equivalent of 13 full monthly payments, at year’s end.
4. Use money merge accounts (the Australian method) – In Australia, mortgages are generally set up like home equity lines of credit, or HELOCs. They double as checking accounts, thus the term “money merge.” When you get paid, you deposit your check into the account, and as you spend money you take it back out again. You hope to put more money in every month than you take out.
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