How to Pay Off Your Mortgage Early

First things first: should we pay our mortgage off early? The answer in most cases is yes. Unless you're earning a higher return on your investments than your mortgage rate, or your income is so inconsistent you need to keep your investments liquid, then yes, it is advisable you make all effort to pay your mortgage off early, for three main reasons: · Peace of mind.Research shows that debt makes people feel stressed out and unhappy. · More home equity. · Guaranteed return.This is true with all debt - paying them off is a guaranteed return. Having said that, here are three simple ways to pay your mortgage off early: Pay more than the minimum.It's a no-brainer, right? We do this with our credit cards. We know that if we pay only the minimum, it will substantially stretch the amount of time we need to keep paying. It works the same way with a mortgage. Generally speaking, nobody will stop you from paying extra on your mortgage, and even just a little extra payment can go a long way. Just make sure the extra amount is directed into your principal and not merely set aside for the next payment, so the balance that the interest is based on becomes smaller. A word of caution: before you do this, read your contract carefully. Some contracts indicate prepayment penalties, in which case, you'll need to study if the amount of money you save from overpaying will be greater than the amount you will be charged as penalty for paying your mortgage off earlier than expected. Change your payment schedule to biweekly.One advantage of this payment setup is that you're shelling out less money at a time (albeit twice as often). The second advantage is that, at the end of the year, you'll end up having paid for 13 months rather than just twelve, because most months are longer than two weeks - while a year has only 12 months, it has 52, not 48 weeks. Fifty-two weeks is equivalent to 26 biweekly payments, or 13 monthly payments, per year. Again, make sure that the extra payment is credited towards your principal. And before you set up a biweekly arrangement with your bank, confirm whether they charge for this service, and if so, how much. Some banks do it for free, but it is imprudent to presume that all of them do. Refinance.Whenever you find a loan opportunity that offers lower interest, go for it. Never mind if the loan you can take out does not cover your entire mortgage. If, for instance, your 30-year mortgage for £100,000 has an interest rate of 5% and you find an opportunity to get a loan for a maximum of £50,000 at a 3% interest rate, then you can take out that loan, use it to pay half of your mortgage, and you'll save money because instead of having to pay 5% on a full £100,000 principal, you'll only be paying 5% on £50,000 while you pay only 3% on the other £50,000. Of course, if you can take out a lower interest loan for the full amount, that would be even better. This is why people often switch mortgages every few years to ensure they have the best rate. Article Source: http://EzineArticles.com/7067396