Early Mortgage Payoff
An Early Mortgage Payoff Will Save You 10's of Thousands Mortgage Interest Dollars
I know many people who just can't wait to pay off their mortgages. They work extra jobs and scrape and cut corners just so they can have some extra money to pay toward their mortgage principal each month. In some cases, this is exactly the right thing to do because paying off a mortgage early will free the mortgage payer from this obligation and give him a substantial amount of monthly investment capital.
However, in some cases, putting extra money toward a mortgage is not the best move. For instance, for those with high interest credit card debt, ignoring it can be a big mistake. This is true because the more these folks pay on the lower interest rate mortgage, the more they are getting buried by the credit card debt.
This article will show you a step-by-step theoretical plan to work your way through debt to having extra money to invest for building wealth.
Pay Down High Interest Rate Debt First
The first thing any household should do is pay off high interest credit cards. Credit cards are set up to financially eat a person alive. Credit cards charge anywhere is between 11% and 33% interest. With this type of interest being charged, the compounding effects can be devastating!
Furthermore, making the minimum monthly payments will not get credit card debt paid off. Then, on top of that, once one reaches the credit limit, the company will likely make the limit higher. There is no doubt about it, credit cards can provide a slippery slope to bankruptcy.
Whatever it takes, make paying off your credit card debt your number one priority. If it is all you accomplish, you're doing a great thing for your financial future.
Never Get Behind
However, there is a co-number 1 priority. While on your quest to get debt paid off thus freeing up wealth building capital, you must never get behind on your bills. If this takes refinancing your house, working more jobs, or cutting back to a more modest lifestyle, it is important to do so, because paying late charges can put a damper on your wealth building dreams in a big hurry.
You can be one day late on a credit card or mortgage payment and be penalized anywhere is from $25 to $100! While this seems unfair, and probably should be illegal, it doesn't matter. It is a fact of life. Along with paying down your credit card debt your other number one priority is to never fall behind on payments.
The Enormous Savings of an Early Mortgage Payoff
I know of many families who, if they were free of credit card debt and late payments, would have an extra $500 to $800 to pay toward their mortgage principal each month. While this may not seem like a lot, it only takes $100 to $200 a month to make a huge difference as to when your final mortgage payment will be made.
On a $200,000 mortgage, at 7% over 30 years, the monthly payment is $1,330.60. If the person paying this mortgage adds $100 to each payment starting with the first payment, the mortgage would be paid in full in 24 years and 3 months. From this point on, this person would have an extra $1,330.60 to invest each month.
If $200 were added to each monthly payment, the mortgage would be paid off in 20 years and seven months. Over the course of the mortgage, more than $100,000 in interest payments would be saved.
Prepare For Huge Investment Capital
So, what would you do with an extra hundred thousand dollars? IRA's and mutual funds come to mind. How about a good, diverse portfolio of stocks and bonds? Any of these things are possible when you have an extra $1,300 a month to play with. For those a little more daring, it might be appropriate to refinance the home and make a down payment on an investment property and ride this road to financial freedom.
It has been said, 'a journey of a thousand miles begins with a single step.' once you have become financially independent, you'll probably find this first single step you took toward achieving this goal, was the day you started following a budget that helped you pay off credit card debt for good!