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Paying Off Your Home Mortgage

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There are ways to pay off your mortgage while saving on the total cost of the financing your loan. This guide is about paying off your home mortgage.
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By 9 found this helpful
August 3, 2011

Paying one additional mortgage payment each year, whether in a lump sum or monthly increments, can lower a 30-year loan down to 18 years. If you pay more than one extra payment, the number of years will decrease even more.

Since this additional payment will be applied only to the principal and not the interest, you end up saving thousands and thousands of dollars once the home is paid off! And it also lowers the total amount of interest the borrower will pay, because it lowers the principal and length of time it will take to pay off the loan. So you save twice with each overpayment. Make sure you have pre-payment privileges in order to save.

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By Julia from Boca Raton, FL

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Anonymous
September 24, 20120 found this helpful

Even though I had 30 year mortgages, I used an amortization calculator to figure out payments as if I were paying on a 15 year mortgage. The additional amount really isn't much. I've owned two different homes over the years and have always paid extra with every mortgage payment in order to reduce the amount of interest paid over time.

Recently, I was able to refinance my home from a 30 year to a 15 after only have lived in it for 5 years. I've continued to make payments the same as I did before. If my financial situation stays the same, I will have it paid off in 12 years instead of 26 years with my original mortgage. Can you say "Ka-Ching!"?

Be sure to check that the additional amount is being applied to principal and that there are no pre-payment penalties. I reconcile my mortgage statement every month to make sure.

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January 5, 2009

I have been re-reading Possum Living by Dolly Freed. Her number one thrift tip is to have your house paid for. She says: "Have you read John Steinbeck's 'The Grapes of Wrath' When we read it, it completely amazed us. All that starvation, squalor and general misery the Okies were forced to endure stemmed from only two roots: (1) the fact that they didn't own their homes outright, and (2) their mule-headed determination to rely on the money economy. They would have had problems, but not all the grief they had, if they had owned their homesteads in Oklahoma. The geek who stayed behind living on wild rabbits probably wound up living better than anyone else in the story."

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Dolly might be a little rough, but basically she is right. She's talking about the Great Depression, of course, and some people feel we are headed into that again. So many of us are living from paycheck to paycheck, paying interest on everything we "buy" and buying stuff we don't need.

I also just read "Angela's Ashes" which is a painful and crude read, because I can see that they relied on the money economy instead of getting out and scrambling for food, fuel and the basic necessities of life. Only the author, Frank McCourt, showed much initiative, and he didn't have any guidance from a more experienced person. He survived, and that is the climax of the story. A paid-for house, at least in our current government, is pretty good insurance against starving. But don't make the mistake of using it for collateral on a loan, or you can still lose it. There have been so many newspaper articles in the past three months on people who were well off, at least on paper, who are now homeless. Whatever you have to do, pay off that mortgage. Grow your own food and reduce the grocery bill. Wear your clothes until they are truly worn out if necessary. Stop going out and don't drive unless you have several errands to do. Barter. Help your neighbors. Gather and sell aluminum cans. If you have ten cents left over at the end of the pay period, put it away for an extra payment. This may sound extreme, but I think it's realistic. Don't want any ThriftyFun-ers going homeless!

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Source: "Possum Living" by Dolly Freed, Universet Books, 1978.

By Coreen from Rupert, ID

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March 31, 20120 found this helpful

I forgot to add. I am debt free at the present time.

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By 1 found this helpful
January 15, 2008

Set your sights high. Know what you want, and then use every ounce of your being to get what you want.

A number of years ago, my hubby and I decided to buy a house. We found the perfect house for us. When we bought, we told ourselves that we would have the house paid off in 5 years. Our friends laughed at us, our accountant laughed at us, and no one thought we could accomplish what we had set out to do. No matter, we had our home paid off in just over four years. No it was not because we were rich, it was because we put everything into paying off our home. We did not eat out much, we curbed our spending, and we did what we set out to do.

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If you have an idea, no matter what, follow it though and you can accomplish great things.

By Karyn from Ottawa, Canada

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March 7, 20120 found this helpful

This is simply a no brainer; pay off as early as you can and keep your own money. IRS is not going to give anyone anything unless you have tons of itemized deductions which most of us don't have. I've bought several houses in my lifetime and never did come out ahead with IRS because I didn't have enough to itemize.

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By 1 found this helpful
August 12, 2011

If you are in good standing on your Mortgage payments, many banks will put you on Bi-Saver payments which means that you pay one half of your monthly mortgage payment every two weeks.

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January 12, 2014

You can pay your mortgage payments bi-weekly, rather than monthly. Two more payments a year adds up a lot of savings over several years. I shaved several years off my mortgage by doing this.

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July 5, 20042 found this helpful

To really cut years off your mortgage, make an extra payment a year but do it this way. Say your mortgage payment is 1200/month. Divide that by 12 ($100) and add that above and beyond that monthly payment.

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June 24, 20040 found this helpful

If your mortgage payment is $1200 per month and you normally pay it on the 1st of the month, start paying $600 on the 1st of the month and then on the 15th of the month pay the additional $600.

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August 31, 2007

Reduce the amount of interest you pay on your mortgage payments by simply adding additional principle dollars to the payments you make each month. You don't have to do this every month; you could do it once or twice a year if you receive bonuses or a tax refund.

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Questions

Ask a QuestionHere are the questions asked by community members. Read on to see the answers provided by the ThriftyFun community or ask a new question.

February 4, 2006

I am sending weekly mortgage payments to my lender and sent a request in writing instructing them how much to apply to principal, interest and escrow. They accept my payment but hold it in a suspense account until I call when the next payment is due and tell them to apply it. Every time I call they tell me they do not accept partial payments, yet they hold my money without applying it. I do this to make it easier to budget weekly, and was hoping to apply money to the principal to get the amount down weekly. Is it legal for them to hold my money in a suspense account even thought I have instructed them how to apply it? Can they refuse these payments legally? My mortgage payment is always on time and up to date. Can you help?

Cindy

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February 8, 20060 found this helpful

Your heading is a bit misleading. It's not that your mortgage company won't accept payments because they are accepting them. They just aren't applying it to your account because they consider it a partial payment. It also seems that you are standing on principle here because you say it's not a problem for you to pay and additional amount on a monthly payment. You just want to know if it's legal to tell you what they have. For that question, you need to contact an attorney - someone who knows the law.

With that said, this is what I did when I owned a house: I took out a 30yr loan. I used a mortgage calculator and based the loan on a 15yr mortgage. You'd be surprised that it doesn't add much more to the monthly payment. Then I divided that amount by the number of weeks in the month. I transferred the weekly amount to a savings account until it came time to pay the mortgage. Then I transferred it back to the checking account and paid the bill. Within 7 years, I had saved 10's of thousands of dollars in interest payments and my loan officer was so surprised and impressed! I did the same thing for property taxes, insurance bills, etc. I can't tell you how many times it saved my but from coming up short at certain times when all bills came due at the same time! Good luck with your problem. Like I said, if you want legal advice - Your best bet is to pay for an attorney.

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By guest (Guest Post)
February 10, 20060 found this helpful

Is it legal for them to do this? It probably is -- I will echo previous replies and suggest you get an attorney to answer that for you, if you feel it's worth the expense. Even though it must seem to you like the mortgage company people are just being difficult, I'm sure there's at least a grain of truth to the notion that taking multiple payments each month would quickly turn into a bookkeeping nightmare for them. I agree with previous replies -- stash the money away somewhere on a weekly basis, but give it to the mortgage company only once a month, asking to have the extra applied to principal.

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April 19, 20060 found this helpful

In respect to your mortgage company not being in your state, that doesn't matter as I'm pretty sure if they write the mortgage in your state, that contract must abide by state regulations.

As for pre-paying mortgages, I just left this post in another topic on this site. PLEASE READ before deciding to prepay and make your decision wisely.

In some circumstances prepaying your mortgage is not the best option. Currently, the average 30 yr mortgage rates are about 6-6.5%. If you signed a mortgage in the past few years, you may have a rate as low as 4%

Historically, the return on stocks have been about 10% annually. Additionally, since you get to deduct interest you pay on your mortgage, the actual rate of your mortgage would be about 4.6-5% [based on the 6-6.5% mortgage and assuming a 25% tax bracket].

If you have high interest rate CC's or/and high rates on your car, then pre-pay those off, otherwise invest the money, retirement will come quickly and our life expectencies are growing each day.

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By guest (Guest Post)
June 26, 20070 found this helpful

I am a Mortgage Specialist and an agent for Equity Corp that handles these types of situations. If you would like to learn more, please contact me via email: caseyquel AT hotmail.com

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January 8, 2009

I want to know if there is a way to pay off your mortgage faster. I live in Canada.

Little Princess

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By guest (Guest Post)
January 14, 20090 found this helpful

Whatever method you choose for early paying of principal, you should not have to pay extra fees to anyone. Ensure by specifically checking (getting a statement for example) that the payments ARE reducing your principal rather than being warehoused or being placed into an escrow account after you've been paying the extra for a few months.

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By guest (Guest Post)
January 15, 20090 found this helpful

Whatever method you choose for early paying of principal, you should not have to pay extra fees to anyone. Ensure by specifically checking (getting a statement for example) that the payments ARE reducing your principal rather than being warehoused or being placed into an escrow account after you've been paying the extra for a few months.

Reply Was this helpful? Yes
January 15, 20090 found this helpful

When we bought our house, we had it in mind to have it paid off in 5 years. No one thought we could do it. Ha - we paid it off in four.

First when we found a bank to do our mortgage, we made sure we could pay back extra each pay day without getting penialized. Second, we put all the funds we could find on the mortgage. We used the Credit Union. (Ottawa, Ontario) We cut down on extras in our shopping, dined out only occasionally, and put all we could down. We had even sold our truck to purchase a smaller vehicle and with the extra money, down on the mortgage.

The way we looked at the situation, we are only young once, and we could work hard and save hard for our goals. We are now mortgage free and are now enjoying spending on us. Yes, spending on the fun stuff.

Good luck to you.

Karyn

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By guest (Guest Post)
January 15, 20090 found this helpful

I believe Deeli said it best. First, check to make sure there are no fees or penalties for making extra payments to principal. Then write a separate check each month and mark it on your check "for principal only". Some months it might only be $25 but other months might be for a lot more. This is why I did not make it automatic. You never know what each month brings. I paid off a 30 year mortgage in 7 and feel absolutely free!!

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By 0 found this helpful
January 9, 2012

I am 48 years old and have 3 boys (16, 13, 7) and a wonderful husband. I have so badly wanted to "get it" when it comes to living frugally, but I get caught up in suburban life and credit line mortgages. Expenses such as music lessons, soccer teams, vacations, clothes, healthy organic foods, restaurants etc. have kept me from our goal of paying off our mortgage, car loan, etc.

I would love to hear about any stories where families have started living frugally "late in the game" and have achieved success. I want the best for my boys regarding school and opportunities as I am sure every parent feels. Thank you to everyone for your support and thank you to this site for providing inspiration.

By jjawt from BC

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January 12, 20120 found this helpful

Hello jjawt, although I am in the UK I think living styles are reasonably similar for me to assist. I live a suburban life but thankfully, I don't keep up with the Jones'. This means I don't aspire to be like others who are happy to spend money on credit and worry about how to pay debts off.

There are many sites and forums for advice, start doing your research. You could start by looking at the need of 2 cars, can you get by with 1? Do your children need to do all the activities? Can you start looking at your eating schedules and change to meal planning and bulking out meals and eating more veg and less meat and cooking from scratch? I use cheap electricity at night to set my washing machine and dishwasher going, is this possible for you?

It takes planning and some time to achieve a cheaper lifestyle but because of the financial situation in the UK and the impact on food prices, fuel etc., I have now given up eating out to twice a month and the cinema nights out are on the back burner for this year anyway. If you look at your life as a whole you will be upset and give up on this new challenge but look at one area first, solve this and move on to the next think - baby steps.

If you would like more information message me. Good luck with your new adventure, I hope to pay off my mortgage early and I have found new fun outings which don't cost a lot or are free. Can this also help you?

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January 12, 20120 found this helpful

It's never too late. I pretty much lived that lifestyle when I was married. I never was an over spender but I certainly wasn't frugal either. When I got divorced at the age of 48 and custody of two teenagers, I didn't have much of a choice. I found it so rewarding when I found a bargain at the thrift store or when I got something free my using double coupons. It's really fun being frugal because you feel so in control of your life.

In my case, becoming frugal has brought so much self esteem and I don't care what other people think. I have a good friend that has always seemed envious of me because I don't have debt. And now that we are seniors, it seems beneath her to ask an establishment for a senior discount. I have a sister that has always told me I'm lucky because of no debt but she does not get it that having a secure lifestyle required sacrifices.

I know you want the best for your kids but doing without one thing or activity for the good of the future is well worth it. It's a good feeling knowing a house is paid off and there is a raining day savings. Sleep comes easy.

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January 12, 20120 found this helpful

For great motivation, try Dave Ramsey. He has radio shows/podcasts that feature call-in listeners who are paying off debt. His books are super! His method is to pay one bill off, take that monthly bill money and put it toward the next bill, etc.

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January 12, 20120 found this helpful

The best way to pay off any debt faster is to make more than the minimum payment every month. BUT: you should pay any amount over the minimum with a separate check and mark on the "For" line TOWARD PRINCIPAL, otherwise they can put that extra money toward interest and it is perfectly legal. If you do this for credit cards, charge accounts, home loans, your mortgage, etc, you will start to see the balance owed drop. If you have to, pay off one debt this way, then the next, etc until you are debt free. Keep in mind that it doesn't have to be a lot of money. Any amount will help drop the balance due.

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