Who can help me pay my mortgage?
If nothing’s certain in life except death and taxes, a mortgage surely isn’t far behind—at least that’s the case for 70% of Americans, according to a recent study by Zillow.
But have you ever stopped to imagine life without a mortgage?
When you’re on a budget, it can be hard to picture. After all, you kinda like the whole eating-three-meals-a-day thing and don’t want to give it up to make room for loftier endeavors. If you have to choose between food and freedom, cheeseburgers win every time.
But here’s a little secret: You can pay off your mortgage without starving your budget. Let’s explore three simple tricks for getting ’er done based on a $150, 000, 30-year mortgage with a 4% interest rate.
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Divide and Conquer
One easy way to shave years off your mortgage is to pay a little extra each month. Every dollar you add to your regular payment each month puts a bigger dent in your principal balance—and you don’t have to double-down to make a difference. Adding just one extra payment each year knocks four years and nearly $17, 000 off your mortgage!
Can’t do it in one big lump sum each year? No problem! Break it down into smaller chunks using one of these two options:
–Divide your payment by 12 and add that amount to your monthly payment. In this case, we’d add an extra $60 to our regular $716 monthly payment, bringing the total up to $776.
–Pay half of your payment every two weeks—also known as bi-weekly payments—instead of a single payment once a month. That gives you 13 payments a year instead of 12. For a $716 monthly payment, that would mean $358 every two weeks.
Throw in an Extra Andrew Jackson
If $60 a month puts too much crunch in your budget, never fear—your favorite former president is here! Put Andrew Jackson to work for you by adding $20 to your mortgage payment each month.
Sounds easy, right? That’s because it is! Even better, you’ll pay your mortgage off a year and a half early, saving over $6, 200 in the process. It may not be a huge win, but think of all the lives you could change with that extra dough and another 18 months of living and giving like no one else.
Unleash the Power of the Brown Bag
Toting a brown bag to work every day won’t win you any fashion contests. But what if we told you it could save you $45, 000? Now that’s a purse of a different color!
If that doesn’t get you excited, consider this: Trading lunch out for eating in can make you a lean-and-mean, mortgage-free machine 11 ½ years ahead of schedule. From now on, your bologna has a new name. It’s M-O-N-E-Y!
A Word (or Three) of Caution
Before you start making extra payments, let’s go over the ground rules.
–Check with your mortgage company first. Some companies only accept extra payments at specific times or may charge prepayment penalties.
–Make sure additional payments are applied to the principal and not to the following month’s mortgage.
–Don’t shell out your hard-earned cash for a fancy-schmancy mortgage accelerator program. You can accomplish the same goal all by yourself, thank you very much!
Your Next Move
Want to score major homeowner points? Make your next home purchase a smart one by paying cash (Dave’s favorite method) or sticking with a 15-year, fixed-rate mortgage. If you really want to knock it out of the park, keep your monthly payment to no more than 25% of your take-home pay.
If you’re looking to buy a home you can truly afford, try one of Dave’s real estate Endorsed Local Providers (ELPs). Your ELP is an expert real estate agent who can help you get a great deal on the home that’s right for you. Best of all, you can trust an ELP to give you the same helpful advice you’d hear from Dave.Find an ELP
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I agree with Michael Cheng. If you have a great credit score, stable, verifiable income, verifiable cash on hand or assets, you are a dream client. By comparison shopping, you will be able to obtain a Loan Estimate from at least three different types of lenders: Talk with the mortgage department of where you currently bank. You already have a banking relationship with them. This is a good place to start. Next, apply with a local, licensed non-bank mortgage lender. Somebody located in the town in which you live. Last, apply with a local mortgage broker.