One of the quickest and easiest ways to pay your home loan down fast is by using some kind of mortgage acceleration plan. Paying off your mortgage loan faster can easily save you thousands or even tens of thousands of dollars.
How Mortgage Acceleration Works:
Weekly, bi-weekly or monthly payment plans? If you can manage it, and if your mortgage company or bank allows it, I recommend you pay your home loan payment weekly. This simple debt reduction tactic can save you a lot of money over the life of the loan. Here’s how:
To simplify things, let’s say your monthly home loan payment is $100. Lucky you, right? So you are paying $1,200 a year.
$100 x 12 months = $1,200
Rather than paying $100 monthly, you start paying $25 weekly. It’s the same thing, right? Now you are sending 52 payments of $25 which adds up to $1,300 a year.
$25 x 52 weeks = $1,300
So now you have sent an extra payment every year, which goes toward the principle, simply by changing ‘when’ you pay, not how much. Actually you are paying more but you just don’t feel it. There’s something like 4.3 weeks in a month, not 4 week in a month. Mortgage acceleration lets you take advantage of that extra time.
My Personal Example:
Using my personal example, you can see that by making weekly payments and sending a little over $350/month extra toward the principle my 30 year traditional mortgage will pay off in fifteen years (only 12 years to go). Using this tactic, I will save close to $100,000 during the life of the loan. It would take a lot of grocery store coupon clipping to save that kind of cash! 🙂
Side Note: My monthly home loan payment just dropped by $130/month because my home lost market value – Hooray! I’ll still continue with the same weekly payments and we should be completely debt free, including the house, before this blog post is eight years old. Man this stuff is FUN!
The First Step:
Check with the financial institution servicing your home loan and ask about a mortgage acceleration program. These programs go by many names but you generally have to ask. Other names include interest reduction plans, equity accelerator (for Chase Bank), or mortgage reduction programs.
Don’t Stop At Basic Mortgage Acceleration:
Now that you have the ball rolling, and once you have a REAL emergency fund established, start dumping extra principle payments into your loan (DO NOT interrupt your debt free plan to do this). It’s amazing how quickly you can pay off your home with a little planning and when you get proactive.