How To Pay Off Your Mortgage In Record Time

 For as long as your mortgage is not completely paid off, you will always face the risk of having your home foreclosed on.

Many people have lost their homes after making mortgage payments for years, all because they failed to pay the outstanding balance of their mortgage loan at the time of foreclosure.

It can be argued that the longer you postpone the repayment the better, due to the fact that you can put the money to better use and take advantage of the time value of money.

However, the longer you take to pay back what you owe on a mortgage or loan, assuming traditional non-creative financing, the more you’ll pay the lender in interest charges.

Furthermore, if you are a first time homeowner, you will end up carrying the risk of losing your home for a longer period of time.

If it is your interest to pay off your mortgage in as short a time as possible, here are 4 ideas you can use.

 1.  Make a bigger down payment

When you are negotiating a mortgage from your lender, you are often required to come up with an amount of money that represents your equity in the property.

This down payment is usually a percentage of the value of the property and can vary depending on how risky your lender perceives you to be.

The difference between the cost of the property you are purchasing and the down payment is the principal amount of your mortgage loan.

To keep the principal amount as low as possible, you can opt to make a down payment that exceeds the required amount if you can come up with the money.

This increases your equity in the property while reducing the amount for which you have to pay interest.

2.  Negotiate long-term

When you approach your lender, negotiate for the longest possible term of repayment, even though you do not intend to take that long to clear your mortgage.

This will ensure that your monthly installment is a small manageable amount. For instance if you negotiate a 30 year mortgage, your monthly repayments will be less than if you settled for a 10 year mortgage.

Keep your accelerated repayment plan to yourself.

3.  Pay more than the minimum monthly requirement

Aim to make a larger monthly payment than is necessary where possible. This will allow you to stay ahead of your payments and will also reduce your outstanding balance faster.

Your credibility with your lender will increase, and you will not be under any pressure to keep up with your payments. Check with your lender to make sure you are not penalized for paying more than is required.

4.  Avoid the equity release temptation

Most mortgage lenders will want to keep you in debt for as long as possible because your monthly interest payments constitute a source of income for them.

When your outstanding loan balance falls below the value of your home, you may receive offers from your mortgage lender to borrow even further against the same property.

It pays to take extreme care when making the decision to take out an equity loan against your home.

Worse still if the top-up loan is used for consumption, you are bound to stay in debt for longer than you anticipated, with your home at stake in the event of a failure to meet your scheduled repayments.

Owning a home free and clear does not have to take a lifetime. To stop worrying about being homeless the moment you cannot cover your monthly installments, coming up with a strategy to pay off your mortgage in record time can prove useful.