How you can pay off your mortgage early by accelerated payments

How you can pay off your mortgage early by accelerated payments

If you want to pay off your 30-year mortgage in 23 years or even a smaller period (shorter), you can do it through accelerated payments. You can use a loan mortgage calculator to find out how fast you can pay off your mortgage and how much you can save by making extra payments.

Accelerated payments

Accelerated payments help you pay off your mortgage faster. You can make accelerated payments in various techniques; however, they all necessitate paying some extra money every year. By making extra payment, not only do you repay your mortgage sooner but also you can save thousands of dollars on interest. Three common accelerated payment techniques that you can follow are given below:

1) Bi-weekly payment

One of the most popular techniques to make accelerated payments is the bi-weekly payment plan. Your mortgage lender can arrange for this and this suggests that rather than making a single monthly mortgage payment, the payment is essentially divided in half and you have to make this half payment every two weeks. Under the bi-weekly mortgage payment plan, you end up making one additional mortgage payment every year, which lowers your loan term from 30 years to 23 years.

2) Additional payment

The additional payment plan is one more option. This indicates that every time you find some cash inflow such as a stimulus check, a tax refund or a bonus paycheck, you must make one additional payment. This additional payment made every year also lowers a 30-year loan to 23 years.

3) Add 1/12th of your monthly payment

If the bi-weekly mortgage payment plan does not suit you, go for the 1/12 hike in payment plan. With the help of this technique, you make your usual monthly mortgage payment along with 1/12th of your payment. For instance, if the amount of your monthly payment is $1,200, sum up $100 to your payment. At the year end, you would have paid an amount which is equal to an additional monthly mortgage payment and have cut down the loan term to 23 years.

It might happen that you can’t manage to make one additional payment every year since for some individuals, making an additional 1/12 payment every month requires great effort. What is crucial to keep in mind is that anything more you put on your mortgage would lower the loan term even though the extra payment is only $50 per month.