5 Ways to Eliminate Mortgage Debt
There are different types of debt, with some being quite preferable to others. Although student loans aren’t that much fun to deal with, they are considered ‘good’ debt. They usually come with a fixed, low interest rate, and you’ll have as long as you need to handle them. Credit card debt is more frequently considered ‘bad’ debt, in that the interest rates fluctuate, are usually high, and carrying that debt around leaves you paying far more than necessary for your everyday purchases. Mortgage debt falls somewhere in between. Having a mortgage means you are in a strong enough financial position that you were approved for that significant loan. But paying it off over thirty years can freeze your ability to take on any other major expenditures, what with a huge chunk of your monthly income going to that one bill. The jury is out on whether you should pay it off early or hold the line, but if you’re interested in ridding yourself of this huge expense, here are five ways to eliminate mortgage debt.
First of all, consider refinancing your 30-year mortgage into a 15-year product. This obviously forces you to pay it off far earlier, but that forced motivation isn’t the only benefit. Today’s interest rates are far lower than they were a decade ago. So if you’ve held onto your original mortgage for quite a while, you could refinance and literally save tens or even hundreds of thousands of dollars in interest payments over the life of the loan. Just remember that you’ll have to deal with higher monthly payments.
Another solid option is to funnel any raises you receive at work right into your mortgage debt. Those periodic cost of living raises you receive don’t actually make much of a difference in your daily life. After taxes and fees, it could end up being something like $200 extra a month. You’re not going to be flying to Hawaii on that windfall. But if you add that extra money directly into your monthly mortgage payments, you’ll actually cut years off your repayment cycle.
Sometimes you can’t commit to that type of additional monthly payment. But what if you come into some sort of windfall? Whether through an investment paying off, an unexpected gift or even an inheritance, there are those moments when an extra couple thousand dollars falls into your lap. Consider turning around and putting that into your mortgage. Do this once a year, and you’ll cut dozens of payments off of your mortgage.
There are also ways to restructure how you make payments that creates a huge difference. Instead of making your regular monthly payment, make payments every two weeks instead. You won’t really feel the difference, but you’ll actually end up making one extra payment each year. Over the life of a 30-year mortgage, you’ll trim almost five years off of your total repayment period.
Finally, consider playing with several of these methods over time. Hopefully you’ve found enough information here to give you some ideas how to proceed. Well, there’s no harm in a little trial and error. Perhaps one year you can make bi-weekly payments, and the following year you go back to monthly payments but make a single, large windfall payment. There are no rules here, and the more ways you can combat the problem, the greater the chance you’ll eliminate your mortgage debt quickly and effectively.