For most homeowners, paying off the mortgage is one of the biggest life’s worries. Having this kind of a noose around your neck is pretty tough, which is why Americans are constantly stressed about losing their jobs.
However, mortgage payments don’t have to sound so grim. There are numerous tricks you can use to expedite the process, such as increasing the number of payments or refinancing. In this article, we’ll review some of the best tricks for tackling mortgages and how that would look in practice.
Pay every two weeks
The biggest issue with mortgage payments is that most people are inflexible. They’re stuck in this traditional way of thinking, believing they need they can only pay a mortgage once a month. This can’t be farther from the truth.
For example, a good trick is splitting your monthly mortgage into two parts and paying them biweekly. So, instead of covering your monthly payment once every 30 or 31 days, you’ll pay it every 28 days, allowing you to make 13 annual payments instead of 12. All of this could reduce your total loan from the traditional 30 years down to approximately 25 years.
Make an additional payment
While most people consider biweekly payments as an efficient, predictable solution (you pay money every, for example, Monday), some homeowners consider it an unnecessary hassle. Instead of going with this solution, they would much rather make an additional 13th payment straight up.
The good thing is that you can plan this strategy according to your annual work bonuses or tax refunds. So, when the influx of cash comes your way, you can simply reroute it toward a mortgage payment. Keep in mind that, for this trick to be efficient, you’ll have to pay against the principal.
Consider reverse mortgage
When you first take a loan, you’re probably not thinking about reverse mortgages. However, if you’re a bit older and don’t have kids, this strategy might prove to be an excellent solution.
Basically, when you take out a reverse mortgage, the financial institution is obliged to cover the rest of your payments. In return, they get the house when you move out, die, or if you’re unable to maintain the property. In most cases, the property transfers hands due to death.
If you’re still unsure about the process and how the math would work out, we suggest you check this reverse mortgage calculator.
Recast your mortgage
Lack of financial discipline is the most common reason behind unpaid mortgages. Even when a person gets a sudden influx of cash, they don’t necessarily think about settling their debts. Instead, they’re much more likely to buy a new shiny toy or go on some other wild shopping spree.
If you ever get an inheritance or some other unpredicted inflow of money, we suggest you use it against the loan principal. Doing this won’t change the basic contract, but it will reduce how much you need to pay on a monthly basis.
However, keep in mind that not every loan is eligible for recasting. For example, most governmental loans don’t allow a reduction of the principal. If you wish to take advantage of this strategy, we suggest that you inquire about all these small nuances before signing a contract.
Consider refinancing
When most people hear refinancing, the first thing that pops into mind is taking another loan to cover the previous one. However, the term can refer to other things as well.
For example, you can turn a longer, 30 or 40-year loan into a 15 or 20-year loan. Shorter loans usually have higher monthly payments but also come with lower interest. In other words, if you just had a promotion at work, you should definitely take advantage of this opportunity.
Another good strategy is to find a flexible loan. These financial products can be a bit trickier as they come with caveats and additional terms. However, if you’re well-versed in these services or have a financial advisor by your side, they can be perfect for your specific situation.
Go with adjustable-rates
Adjustable-rate mortgages became notorious during the market crash of 2008. These financial products start with lower interests, which increase over time. While this might be alluring at first, the monthly payments become a real burden over time.
Despite its inherent disadvantages, an adjustable-rate mortgage can be a great solution for many people. This is especially true for young professionals who are working on trainee-level paychecks. By opting for one of these products, they can avoid high renting costs and start their process toward homeownership.
