Paying a $ 250,000 mortgage calls for a lot of diligence and effort. Paying it off in only five years may therefore appear unachievable, but with the correct degree of will and the correct strategy, it is perfectly reasonable. The fastest approaches to pay off a mortgage of such kind are these: The fastest approaches to pay off a mortgage of such scale are these:
The reason for refinancing can be to obtain a lower interest rate on the loan
Another is to ensure that you obtain a mortgage and then find the most economical rate at which to refinance it. The interest rates are not constant; there are always better rates out there, and given your current financial status, you can get a much better rate as compared to what you are currently paying. Reducing your rate by 1-2% can translate to saving about a hundred thousand dollars over five years. Like any other financial product, you should compare quotes from different lenders to find the best one. This one single move can cut your payoff time by a good number of years.
It is wise to pay more than the minimum that is required every month
The concept of paying an additional mortgage payment per year bears a lot of benefits. Taking it further when one can pay a little extra between $100 -$200 than the minimum installment every month is a big improvement. For a 30-year/ $250000 loan at a 4% interest rate, saving $100 per month in interest and paying the loan 3 years earlier is equivalent to $ 26000. Bump that to an extra $200 per month, and you save almost $50,000 by paying it off in slightly less than seven years.
Arrange to pay only fifty percent of the annual bonus towards the mortgage
As for those who get bonuses at their workplace quarterly or annually, it would not be such a bad idea to pay half of it to the mortgage. So on a $10,000 bonus, that’s an additional five thousand dollars towards the payment of your loan, once a year. This alone can shave a whole year off a thirty-year term! By the time you are out of this strategy after 5 years, you will have shaved a total of 10 years off your months of repaying.
Spend Tax Returns and Bonuses
Hence any additional funds should be directed to servicing of the mortgages. If you receive a windfall in terms of cash through bonuses, tax returns, or even inheritance, ensure that you use it to pay back the loans by going for the principal amounts. In the event, you receive a $5,000 gift or tax refund annually for 5 consecutive years, the resultant effect would be a reduction of $25,000 to your mortgage balance.
Look for Part-Time Employment or Better yet Freelance Work
For example, having additional income each month to apply on the mortgage for extra payments towards the principal is highly efficient. It is still possible to make a difference even when earning just a few hundred dollars more, each month. Employ your skills in online writing or graphic designing and work for different companies from home or do part-time jobs such as driving a taxi for a few hours in a week or working in a retail store for several hours in the evening. If you borrow $250,000 at the moderate interest rate, every extra $500 you pay per month will shave off a couple of years off the loan repayment period.
Cut Expenses and Downsize
As you know, the lower your cost of living is the more money you will have to transfer to the mortgage repayment. Move to a less expensive house, drive non-glamorized paid-off cars, eat out less, use less energy, cut down on subscriptions, and live a frugal life. Refraining from overspending and ensuring housing costs and many bills are as low as possible makes it possible to direct as much cash as possible to becoming mortgage-free. This means that the more extreme you can afford to cut back on lifestyle expenses the more time it will take to pay off a mortgage.
Using such aggressive measures on a $250,000 mortgage, one can set up and pay off the mortgage in just five years. Use as many of those rapid payment strategies as possible and you will be paying off the mortgage you have never thought possible.
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