How to party like it's 2042 long before then

If you bought a home this year with a standard 30 year mortgage, you’ll make your last payment in 2042. If you’d like to celebrate the day you own your home free and clear of a mortgage before the 30 years are up, here are some tips to help.

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  • If you bought a home this year with a standard 30 year mortgage, you’ll make your last payment in 2042. If you’d like to celebrate the day you own your home free and clear of a mortgage before the 30 years are up, here are some tips to help:

    1. Pay just 10 percent more each month on your mortgage and you can shave five years off the life of the loan, depending on your interest rate; 20 percent will shave nine years! Even 5 percent, just $50 on a $1,000 mortgage payment, will cut three years off the life of a loan. (The higher your interest rate, the more impact a little more money has.)

    2. Remember that paying down the mortgage has much the same effect as putting money in the bank, except that you’ll effectively earn a better interest rate. Of course, the money the equity you build in your home is harder to spend, but that’s a good thing!

    3. If you get paid every two weeks, you’ll be getting 26 paychecks and only 12 scheduled mortgage payments. If you make one extra mortgage payment during the year, the effect is similar to number 1, above. You could shave more than a decade off your mortgage.

    4. If you made a down payment of less than 20 percent, you are almost certainly paying what is called Mortgage Insurance. As soon as two years have passed, if you increased your home equity to more than 20 percent, you can refinance your mortgage to eliminate the mortgage insurance. Of course, if rates are higher, there is no advantage, but if rates are also lower, you can create even more cash flow that can be applied to principal each month.

    5. If your mortgage is more than two years old now, investigate a refinance today. Interest rates are low in the fall of 2012 and you may be able to afford a fifteen or twenty year mortgage right now without paying much more each month. Don’t fall to the temptation to start with a fresh 30-year mortgage without committing to pay at least a little extra to shorten the term to at least what it is today.

    6. If you get a bonus or an inheritance, even if it isn’t enough to pay off the mortgage, go ahead and make a big extra payment. You may want to alert your mortgage processor to apply it all to principal immediately and not to future payments over time. By paying down a lump of your mortgage today, more of your regular monthly payment will go to principal each month thereafter and your mortgage will be paid off years earlier.

  • Paying off your mortgage really is a reason to celebrate. A generation ago, it wasn’t unusual for a family to literally have a celebration to burn the mortgage documents once they were completely paid off. Today, many families carry mortgages well into retirement and effectively find themselves slaves to their lifestyle. When you own your home free and clear you own your lifestyle — it doesn’t own you! Follow these steps and become free from your own mortgage.

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Devin Thorpe, husband, father, author of Your Mark On The World and a popular guest speaker, is a Forbes Contributor. Building on a twenty-five year career in finance and entrepreneurship that included $500 million in completed transactions, he now champions social good full time, seeking to help others succeed in their efforts to make the world a better place.

Website: http://www.yourmarkontheworld.com

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