How to pay off your mortgage question is at the top of minds of hundreds of thousands of Americans each and every single month now that we are experiencing some harsh pain with the financial market crisis. And I’m sure that this thought may have crossed your mind at some point. The main reason that we asked the question how to pay off all mortgage is that we may be in the mindset of living debt free and saving thousands of dollars other than spending this money with the bank.
And by the way paying off your mortgage is a risk free investment strategy. And one reason we keep asking how to pay off all mortgage and nevertheless not taking action is that we’re so confused with all the choices these days we just don’t know the right action steps to take. It’s not your fault, as you want to make the best decision since your home is your largest financial asset. All of the mortgage payoff techniques can be broken down into two separate mortgage payoff strategies.
Strategy one: mortgage prepayment.
The first method on how to pay off your mortgage is referred to as mortgage prepayment methods. All simply method is that you use additional cash from your pocket to pay off your mortgage faster. The most shared ways is to contribute additional from your paycheck towards your mortgage each month, use the biweekly prepayment program or make additional payments whenever you have additional cash obtainable to you. You already know about these strategies. The meaningful with the mortgage prepayment strategy is to make sure you have the additional cash to pay off your mortgage.
With this strategy the meaningful decision becomes whether you should use the additional money to pay off your mortgage faster or invest these savings in your 401(k) or save for your kids’ college education. This decision can become very confusing at times.
Strategy two: mortgage speeding up.
This strategy of mortgage speeding up is fairly new and his been around for the last 10 years only. This strategy uses the concept of leverage to pay off your mortgage faster.
In some situations you can end up paying off your mortgage without spending more changing your lifestyle. The way leverages applied with mortgage speeding up is really very simple. Let’s assume for a second you had two credit cards. One credit card had an interest rate of 2% and the other has an interest rate of 6%. Now what would be the fastest way to pay off both these credit cards and save thousands of dollars in the time of action?You guessed right. You would borrow money from the 2% credit card and pay off the 6% credit card. Simply doing this could save you 4% in interest. Over a period of 10 to 12 years this could average a meaningful amount of interest savings. We can apply the same strategy with a credit card towards the mortgage.
Let’s assume your mortgage is at 6% interest rate. We now go ahead and open up a home equity line of credit. We place our paycheck into the home equity line of credit at the beginning of the month and pay the bills at the end of the month. If you set this up correctly you can transform your home equity line of credit to a 2% interest.
Then simply all you have to do is borrow money from the home equity line of credit at specific times and use this to pay off your mortgage. And the end consequence is simple. You could slash 13 years of your mortgage and save over $63, 000 of interest using this one simple financial step. And you don’t have to change lifestyle in the time of action