A mortgage is the largest debt many people will ever have. Although some purveyors of financial information extol the virtues of delaying mortgage repayment and investing the money at a higher interest rate elsewhere, this approach is hardly a guaranteed win in an uncertain economy. Paying a mortgage early is guaranteed to reduce monthly payments for a homeowner, allowing them to spend this money on retirement funds, a child's college or some other lifetime goal.
Rounding
Many think more clearly about debt in round numbers. Some financial professionals maintain that by rounding payments up to the next round number, either the next hundred, next fifty, or simply the next multiple of ten, people who think they don't have enough to pay the mortgage quickly can speed their mortgage elimination process.
13th Payment
A popular method to eliminate the mortgage quickly is to make one extra payment per year on the loan. Because mortgages are offered on an amortization schedule, forcing homeowners to pay most of the interest on the loan during early years, while making increasingly large principal payments later, a 13th payment yearly can have a dramatic effect on shortening the life of a loan. At 5 percent, a person with a 15 year, $300,000 mortgage who makes an extra payment yearly reduces the life of the loan to only 13.4 years.
Refinance
Lowering the interest rate payable to the bank can help eliminate a mortgage more quickly. By taking the amount that had been interest to the bank and instead paying it as an additional principal payment, mortgage holders can accelerate their payment schedule without raising the amount they pay to the loan each month.
Two-Week Plan
Many mortgage companies offer plans accelerating your payments to every two weeks, while reducing the amount due to half your normal monthly amount. Because there are fifty-two weeks in a year, this allows someone who can't afford to make an extra payment each year as a lump sum to do so over the course of a year. Because banks offer this service for a fee, some advisors recommend that people with financial discipline attempt this approach into a savings account to forgo the bank's fees.
Accelerator
Mortgage accelerator plans allow the mortgage holder to deposit their entire paycheck toward their mortgage, then pay their bills out of the account up to the amount of the minimum required payment. This lowers interest payments by the additional amount in the account each month, until it is used by the mortgage holder to pay the bills. People using this type of plan pay fees for the additional record keeping required by the bank.
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