The debate whether or not to pay off your mortgage early is not a new one. People talk about it all the time, and everyone seems to have a different opinion. He says yes, pay it off early. She says no, don’t worry about it. Someone else doesn’t care either way as long as it doesn’t affect them in the least. While the idea of not having a mortgage payment sounds more than a little appealing, there are many people who are just not sure how it works out and what it means for them. That’s where the one additional payment a year concept comes into play.
There are financial experts who claim that you should always pay one additional mortgage payment every year. The simple reason for this is that you can get a little tax break. For example, even if your ‘extra’ mortgage payment this year is really just making your January mortgage payment on December 31 instead of January 1. This is a great way to get a tax deduction by paying more of that mortgage interest during the tax year to take a break.
When it comes down to it, though, the truth of the matter is that paying one additional mortgage payment each year really is a good idea. It is a good idea because you get to reap some other benefits from it as well. When you apply an additional mortgage payment to the mix every year, you will pay off your mortgage years faster than you were originally scheduled. Additionally, you are paying more of the principal balance, which means you have less interest to pay over time. You will save tens of thousands of dollars over the course of your mortgage repayment.
Now the big question remains; where will you come up with an additional mortgage payment each and every year? We know it’s not necessarily in the budget to make an additional mortgage payment every time you turn around, so we have a few suggestions that might help you pay off your mortgage faster and far more efficiently by finding the funds to pay one additional mortgage payment every single year.
Count your paychecks
The way that the world works is that most people get paid every two weeks. There are 52 weeks in a year. When you break it down, that’s 26 pay checks for everyone throughout the year. If you are like most people, you probably know what your total monthly expenses are throughout the year and you probably take half of your monthly expenses out of one check and the other half out of the other check each pay period.
Now, that means you have 24 checks to get you through 12 months, leaving you two additional paychecks every single year that do not require you spend a dime. How about taking those two checks and also saving half your mortgage payment from each one so that you can make a 13th payment this year? You’re not even harming your monthly budget or taking money out of anything that you already have it planned for. You already save this way throughout the year to begin with, so why not keep at it when you have a third paycheck in one month twice per year?
Save a little every month
Let’s say your mortgage payment is $1,000 per month. If you have room in your budget, why not save $83 extra every month to make that last payment for the year? If you think that it sounds like a lot of money every month to save for things that are not really required, let’s break it down even further. Can you spare an additional $20.75 per week? I bet you can spare that kind of money if you stop running to the donut store or coffee shop every single morning.
I could even save that by telling my kids that we are not going to McDonalds for happy meals an ice cream once per week – I don’t like fast food and it creeps me out to go, but they love it and it’s our compromise. I could save that by buying one less bottle of wine every week. I could earn that by doing a quick small job for someone, such as watching their kid for an hour so that they can run to the supermarket. It’s easily done.
It might not sound like a very simple job to just pay off your mortgage early, but it is. By taking one of our little suggestions and modifying it so that it fits your current lifestyle, we bet you can get through an entire year without missing the additional money you are saving so that you can pay one additional mortgage payment without flinching.
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