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Thursday, May 23, 2013
My suggestions would be, never a mortgage lien for loans nor the re finance deals.
One of the biggest steps you can take toward financial security is paying off your mortgage. And, for most people, doing so is an exceptionally sweet accomplishment because it is often 30 years in the making. Getting rid of a large chunk of your monthly housing (you’ll still be on the hook for taxes and insurance) not only makes it easier to sleep at night, it also lowers your annual expenses significantly, meaning that your savings will go farther in retirement.
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There are certainly arguments both for and against paying off your mortgage early (especially in this ultra-low interest rate environment). Many financial experts recommend making sure you are saving enough for retirement and have a healthy emergency fund before tackling your mortgage but if the idea of owning your home outright as quickly as possible is appealing to you, here are some steps you can take to make that goal a reality.
Buy a house you can afford. The first step toward clearing your housing debt is to make sure that that debt is manageable. If you are just getting started on the path to homeownership, keep this in mind. Your home will likely be the most expensive thing you ever buy and keeping your housing expenses to an affordable level will make paying off your mortgage a much more reasonable goal and leave you with a greater deal of financial flexibility down the line.
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Throw bonuses at it. Most people should make it a goal to live off of their base salaries rather than their total compensation since bonuses are never guaranteed. If you are successfully doing that, earmark your bonuses or any unexpected cash from stock options, tax refunds or other income streams towards paying off the mortgage on your main residence. Seeing your balance decrease after you throw a large chunk of cash at it can also really help motivate you as you work towards a complete payoff.
Refinance. This is a no-brainer if you have haven’t already done so in the past few years (and, perhaps, even if you have as rates have continued to fall). If you refinance your mortgage at a lower rate, more of your payment each month will go to principal rather than interest. However, even if your monthly payment drops, you should continue paying your old, higher amount and your balance will drop even faster. If you have a lot of room between your income and expenses, you may even want to consider a 15-year mortgage. Just make sure that you don’t take cash out during your refi or you’ll find yourself farther from your goal.
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Free up expenses. If you cut the cable and save $60 this month, start paying an extra $60 toward your monthly mortgage payment. If your car insurance goes down by $30, add that, too. If you pay off your car next month, start sending that extra $250 to your mortgage company. These “little” amounts add up quickly. Find a mortgage calculator online and play around with the particulars of your mortgage’s amount, length, and rate. You’ll be surprised just how many years you can shave off if you commit extra money to accelerating your paydown – just $100 extra each month can shave 3.5 years off of a 30-year $300,000 mortgage at 5 percent!