Many of us dream to be mortgage free when we do not have to make any monthly mortgage payments. Well, there is no instant solution unless you happen to become the lucky winner of a multi million lottery!
Keeping the funny part aside, I am talking here about how one can adjust the monthly payments slightly or how to take advantage of the low interest rates so that you can pay off your mortgage sooner.
How To Be Mortgage Free Sooner?
If you have been able to keep up with the mortgage payments throughout the past year, you can assume you are a pretty responsible borrower. Even during the hard times you could afford making the payments. Now if you can refinance to lower your monthly payments, it would be great to still keep paying the same monthly amount. With the interest being lower, more money would then go against your principal amount. After a few years you can then calculate how much more you owe. For that remaining amount you can figure out how much monthly mortgage you can afford then. One can safely assume that if the job situation does not deteriorate, one would be better of financially in the future as compared to the present. If you can afford a larger payment you can pay your home mortgage off and be mortgage free in a still smaller number if years. If you think you can pay it off in less than 10 years or less, you can then refinance to a 10 year or less adjustable rate mortgage (ARM). ARMs typically have lesser interest rates than the fixed rate mortgages. This can allow you to pay off your mortgage even quicker.
Obviously, I made some assumptions here. For the above plan to work successfully, you need to be able to keep you mortgage the same or higher and should be able to refinance to a lower interest rate at the same time. This increases the cushion of cash that you can use to pay off your mortgage. Most people upon refinancing would not plan to keep their mortgage payment the same because they get the breather they have been waiting for without realizing that their payment window has again got extended to 30 years, or whatever the time period of their new mortgage is. Refinancing to a long term mortgage when you are above 40 years old, can very well mean you would be still making mortgage payments after you retire.
Therefore, take advantage of the low interest rate but keep making the same amount of monthly payments. Or with the lower interest rate, even if you o for a shorter term mortgage, your mortgage payment may go up only slightly or not at all.
