Mortgage loans are designed so that anyone can own a home. The common 30 year payoff is intimidating to most people. There are those that have figured out how to pay the mortgage off faster and shed 5,10 and even 15 years off the life of the loan.
If the loan was obtained at a high interest rate due to a low credit score and you have since increased your score you might consider refinancing. Anytime the loan can be refinanced with a smaller interest rate it should be done, this saves thousands of dollars in interest but will also reduce your monthly payment. A reduced monthly payment will assist you in being able to afford an early pay off method.
For those who want to benefit from early payoff but do not want to experience a squeeze on their budgets paying a bi-weekly payment instead of a monthly one will work. A bi-weekly payment plan actually pays two additional payments to the loan each year. This can greatly reduce the life of the loan. Since you have paid nothing more than you are used to the budget remains intact and you feel no ill effects of this method.
There are some who pay a large lump sum to the loan at the end of the year. The regular payments are made and then a portion is paid towards the principle. The lender may have limits as to how much can be paid without being penalized so you need to find that out before paying this way. This may be an impossible method for some but for those who do it they pay 15% of the loans balance towards the principle each year and have an extremely early payoff.
If you do not have the ability to come up with a large amount of money each year for a one time large overpayment you can pay over each month. You will still need to find out if you will be given any penalties from your lender before deciding the amount. You pay an over-age amount each month with your payment and it will work the same way as the large onetime payment. Your loan will be greatly reduced and it will be much easier to come up with the extra money each month than the one time large sum.
If you want to find a way to reduce your mortgage by 10 years, 15 years, or more you will need to combine methods. You could begin paying your mortgage bi-weekly and benefit from those two additional payments each year and in addition pay an additional amount on each payment. By paying an additional amount on bi-weekly payments you not only enjoy two extra payments each year but you also have the benefit as if you paid a lump sum amount as well. The more you pay the quicker the payoff so check with your lender about penalties for early payoff amounts. Stay under the limits and if you are lucky enough to have a lender who does not have limits for overpayments then you can reduce the loan as quickly as you would like. .
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