I want to pay off my mortgage in 5 years please help!

Discussion in 'Investing and Retirement Saving' started by Simrin, Mar 3, 2015.

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  1. Having a mortgage is like having shackles around your ankles, no one likes paying a loan especially a mortgage and therefore many people ask how to pay off your mortgage sooner. There are many ways you can do this and if you can successfully implement all these strategies then you will really make a difference to your finances in the long run. Just imagine paying your mortgage off in 5 years instead of 25!

    The first thing that you have to understand is how the payment system works. When you repay a mortgage you pay interest and a bit of the principal value of the home. If for example you have to pay $1000 then $800 goes to the bank as interest payments and $200 goes off towards paying the principal value of the house. Overtime the interest falls faster than the principal payment. If you have purchased a house for $200,000 then the chances are you will pay back $500,000 after the term of the mortgage.

    To pay your mortgage off faster you need to make overpayments. If for every monthly payment of $1000 you make and $200 goes towards reducing the mortgage then if you can overpay by another £200 per month this will mean than you don’t have to make a payment of $800 in interest. The more you over pay the faster you will be able to pay off your loan.

    You have to find ways of generating extra income from your home to pay your home off quicker. If you have the ability to add rooms to your property and then rent them out then this is a great way to generate income. If you can add 3 rooms to your home and then charge $400 per room per month then you can expect to get $1200 a month. If you pay $1200 extra towards the mortgage this means that you will be wiping off 6 $800 interest payments saving you $4800 in interest costs.

    Another way to pay off your mortgage quickly is to use credit cards. From time to time many credit cards companies provide introductory offers of 0% interest for 12 to 18 months. If you can continually get credit at this rate and use the proceeds to pay off the mortgage then you will be paying the loan off soon. If you can generate 10 credit cards each offering $10,000 at 0% for 18 months then you can use one card at a time to pay off a chunk of your mortgage and pay your credit card off and then continue the process. For every $10,000 payment you make you can expect to save $60,000 in interest payments which is a significant amount.

    The most important concept of paying your mortgage off early is to make overpayments; the more money that goes towards paying your actual mortgage off the quicker you can eradicate the debt. It is better to use savings to pay off your mortgage as over time you will save more. Look for ways to generate more income from your property and use that towards the overpayments. Check to see if you can borrow money at low introductory rates to pay chunks off your mortgage. By using these strategies alone you can significantly slash the amount of time it takes to pay your mortgage off.
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