Four ways to pay off your mortgage earlier

To date, the focus has been the buying and selling of real estate, however, now-a-days paying off your mortgage is in, while refinancing to take money out for any reason is out.

Due to the recent foreclosure crisis, the psychological benefit of owning a home free and clear is very appealing. If one of your resolutions this year is to pay off your mortgage early, you’ll find plenty of experts recommending ways to do it: some faster, some safer than others, but all in their own way will work.

Before you do anything, check with your trusted licensed mortgage lender. Having them confirm your loan documents will allow any extra payments made be applied to the principal balance and not just set aside for the next payment. In addition, have them make sure you won’t have to pay any prepayment penalties, either.

1. Just pay more.

Sometimes the simplest method can be the best. Start playing with a mortgage calculator and see how adding a little extra to your regular payment here and there can shorten the length of your loan. Go to and you will see how just $100 a month added to your payment reduces the length of your loan. Then add more, rounding up works, too.

2. Refinance with a shorter-term mortgage.

For those of you who are more committed, refinancing into a 10, 15, 20-year mortgage may be way the go. Fifteen-year mortgages are the most common. Your payment will be higher but, perhaps, not as high as you think. Rates are at record lows for 30-year loans and even lower for a 15-year loan. Be prepared to be committed to this payment.

3. Switch to bi-weekly half payments.

Bi-weekly half payments take advantage of the fact that there are 52 weeks in the year. By paying half of your regular payment every other week you’ll make a total of 26 half-payments or the equivalent of 13 full monthly payments by year’s end. Check with your bank, some will set up a bi-weekly plan for free. Just make sure anything over the regular payment gets applied to the principal.

4. Use a money merge account (the Australian Method).

In Australia, mortgages are generally set up like a home equity line of credit. They double as checking accounts, thus the term “money merge.” When you get paid, you deposit your check into the account and as you spend money you take it back out again. The key here is to put in more than you take out each month. Please note, this is the most complicated method, and requires discipline and a good understanding of cash flow management.

If you have questions regarding available inventory to purchase or the current bank service short sale incentives to sellers, contact Mike Mason, Broker/Owner of MASON Real Estate DRE: 01483044, Board of Director of Southwest Riverside County Association of Realtors® (SRCAR), Short Sale & Foreclosure Resource certified by National Association of Realtors® (NAR) at [email protected] or call (951) 296-8887.

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