Just imagine as you are going through your favorite coffee drive through this week, that a well dressed gentleman stops and offers you $12K for your grande non fat no whip extra hot chi latte. Would you do it? I would take it even if it was the last coffee on earth! It’s a no brainer. Well what about this, what if you take that daily coffee budget and apply it to your monthly mortgage payment. Depending on your coffee taste’s you could be saving anywhere between $30-$85 per month, and that small amount could save you anywhere between $12K and $34K over the life of your mortgage.
Most of us can accept the idea that we must borrow money to purchase a home. We look for the best possible rates and terms, and then we are stuck just handing out our hard earned cash for as long as it takes to pay it off. With current amortization’s of 25,30 or even 35 years, that is a long time to be chained to your lender. If you don’t pay attention it will cost you over double the cost of your home to pay it off. However with a good strategy you should be able to burn your mortgage papers significantly earlier.
Here are a few tactics that you can put to use right now:
1)Pay more than your mortgage amount. Here is an example, say you take out a 250K mortgage over 25 years, at 5.35% paying $1,504 monthly. You find that you have an extra $250 that you can put toward the mortgage every month. By doing this you will save $42,950.88 in interest, and have your self 5.58 years closer to being mortgage free.
2)Take advantage of lower rates. By doing this you are reducing your overall interest costs and therefore paying down your principal faster. On easy way to do this is to take a variable rate. I know it is riskier but 9 times out of 10 you will pay less over the life of your mortgage.
3)Accelerate your payments. Most people are paid bi-weekly. If that is the case with you then pay your mortgage bi-weekly. This works out to an extra mortgage payment a year. If you combine this with example from tactic #1 and put $125 extra ever 2 weeks, you will save $104,174.95 in interest and now be 8.12 years closer to being mortgage free.
4)Use your lucky money, and by that I mean your bonus, tax refund, lottery winnings to pay down your principal. This will really help in the early years of your mortgage. Let’s still use the example above, say this works out to $1,500 worth of lucky money a year. Now you are saving $119,321.13 in interest and will now be mortgage free 9.77 years sooner.
5)Lower your over all cost of borrowing by consolidating all your loans. By combining your car loan, line of credit, credit cards, student loans etc into one low monthly payment and apply the savings to your mortgage. This will result in large savings in over all interest cost and becoming debt free a heck of a lot sooner.
If you want a idea of how this could help you personally, then contact my office and request a free no obligation debt analysis. We will show you how these strategies combined with a proper plan will have you well on the way to becoming debt free.