As a homeowner, have you ever thought of how to reduce your total financial obligation over the life of your mortgage?  Following are some great ideas for doing just that.  I have worked with suggestion #1 and really saw a huge reduction in what I owed in a relatively short period of time.  I mean these concepts really make a difference.

Idea #1

Remit regular principal only payments throughout the life of the loan. Sending in a separate check marked “principal only” monthly, quarterly or annually, will help reduce your total mortgage. Determine what amount you want to apply to principal each year in addition to your regular payments and divide that amount into how often each year you will send a payment. For example, if you decide to send in $4,000 a year for “principal only” payments and you are going to pay quarterly, you will send $1,000 each time. If you are going to pay it monthly, however, the payments should be $333.33 each time.

Idea #2

Accelerate your payment schedule. Contact the lender and request a biweekly payment. IMPORTANT:  You must make payments every two weeks . . . not twice a month.  By doing so, you end of making the game changing extra payment at the end of the year because of the 5 week months.  At the end of each year, you will have made an entire extra payment. This simple concept will shave 10 years off a 30-year loan!

Idea 3

Apply your tax returns to the mortgage. If you receive a refund each year, you should consider applying it to your mortgage. It’s like reinvesting that tax return vs. going out an spending it somewhere. Again, it is important to send the money in a check separate from your regular monthly payment and clearly mark it as a principal only payment. Each year that you send your tax refund to the mortgage company can help shave 10 years off the life of the loan, depending on the total amount you pay in.

If you really want to get aggressive, combine all three strategies and really watch what happens.

Here’s to a major cash infusion come retirement!  Which way to the beach?

Jay Silliman

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