Most people dream about being mortgage free early in their lives, yet too many people veer off course and never take the right steps to make this happen. Can you imagine how much less stressed you would be if you had NO mortgage? It would be like sticking it to the MAN in some small way. No, you probably cannot quit your job and retire. But, if you do lose your job or want to switch careers down the road, being mortgage free can make either of those situations easier to deal with. When you can finally utter the words, "I am mortgage free", you will feel as if a million pounds have been lifted off of your shoulders. One of the keys to your financial life is to get your monthly fixed costs down to as low as possible, and eliminating your mortgage is a huge step in that direction.
What are the 9 steps to Paying Off your mortgage?
1. If you have a young family, skip the expensive trips to major amusement parks and don't buy expensive toys to keep up with the neighbors. Young kids (1-4) don't understand the value of either of these experiences, so why spend extra money to keep up with the Joneses.
2. It is imperative that your first track all of your monthly expenses and then lay down a budget and follow it. The budget needs to include how much money you plan to pay towards your mortgage principal each month.
3. Refinance when you see the rates drop; this can potentially reduce your interest payments and allow you to take that extra money and make extra principal payments against your mortgage. Today, 30 year interest rates are around 4%, so if you are in the 5-6% range or higher, it is imperative that you refinance.
4. When you receive a windfall, you need to immediately use those funds to contribute to paying off your mortgage. Make an extra principal payment. Don't go out on a shopping spree; make a decision to see teh future without a mortgage. Any extra cash, including a second job's income, a bonus, a raise, money you inherit, etc. needs to help towards paying off your mortgage.
5. Retirement is important, and your should plan for it and start saving as early as possible. But, no one knows what life holds for them, so the earlier you can payoff your mortgage, the more time you will be stress-free, and stress is a major cause of illness, so think about it that way! You can always increase your retirement contributions after you payoff the mortgage early.
6. Although it is nice to have a new car, aren't you just trying to keep up with the Joneses? The bottom line is that your car becomes relatively uninteresting after a few months, so the best path is to find a reliable used car that won't require monthly payments and divert the difference to your mortgage.
7. Renegotiate with your utility companies. Check out sites like lowermybills.com and others that allow you to find lower cost alternatives to your current providers, and then call them to negotiate (or switch to another provider). This works for electricity, cable, phone, cellphone, car insurance and other companies.
8. One of the best ways to maximize your payments to principal is to ensure that your paycheck is accurate in terms of the taxes that you are paying. You should not owe any taxes at the end of the year, and you don't want to end up paying money to the government. If you overpay, you are wasting an opportunity to pay down more money every month.
9. Reduce your monthly expenses by meticulously paying attention to what you spend your money on or use (from an energy standpoint). Install programmable thermostats that lower the heat temperature and raise the air-conditioning temperature. Buy mini oscillating heaters (with safety shutoffs) for each bedroom and turned off the heat from 7 p.m. until 4 p.m. the next day. Close the vents in any room that are not in use. Use compact fluorescent light bulbs. These changes can reduce your monthly bills by 50%. Buy energy efficient appliances.
There are many ways to skin a cat, so do whatever it takes to create an environment that will allow you to payoff the mortgage early. If you reduce this fixed cost, you will reduce your stress, reduce the strain on your finances, give you an opportunity to change careers, and allow you to withstand job losses and other financial challenges better in the future.
What are the 9 steps to Paying Off your mortgage?
1. If you have a young family, skip the expensive trips to major amusement parks and don't buy expensive toys to keep up with the neighbors. Young kids (1-4) don't understand the value of either of these experiences, so why spend extra money to keep up with the Joneses.
2. It is imperative that your first track all of your monthly expenses and then lay down a budget and follow it. The budget needs to include how much money you plan to pay towards your mortgage principal each month.
3. Refinance when you see the rates drop; this can potentially reduce your interest payments and allow you to take that extra money and make extra principal payments against your mortgage. Today, 30 year interest rates are around 4%, so if you are in the 5-6% range or higher, it is imperative that you refinance.
4. When you receive a windfall, you need to immediately use those funds to contribute to paying off your mortgage. Make an extra principal payment. Don't go out on a shopping spree; make a decision to see teh future without a mortgage. Any extra cash, including a second job's income, a bonus, a raise, money you inherit, etc. needs to help towards paying off your mortgage.
5. Retirement is important, and your should plan for it and start saving as early as possible. But, no one knows what life holds for them, so the earlier you can payoff your mortgage, the more time you will be stress-free, and stress is a major cause of illness, so think about it that way! You can always increase your retirement contributions after you payoff the mortgage early.
6. Although it is nice to have a new car, aren't you just trying to keep up with the Joneses? The bottom line is that your car becomes relatively uninteresting after a few months, so the best path is to find a reliable used car that won't require monthly payments and divert the difference to your mortgage.
7. Renegotiate with your utility companies. Check out sites like lowermybills.com and others that allow you to find lower cost alternatives to your current providers, and then call them to negotiate (or switch to another provider). This works for electricity, cable, phone, cellphone, car insurance and other companies.
8. One of the best ways to maximize your payments to principal is to ensure that your paycheck is accurate in terms of the taxes that you are paying. You should not owe any taxes at the end of the year, and you don't want to end up paying money to the government. If you overpay, you are wasting an opportunity to pay down more money every month.
9. Reduce your monthly expenses by meticulously paying attention to what you spend your money on or use (from an energy standpoint). Install programmable thermostats that lower the heat temperature and raise the air-conditioning temperature. Buy mini oscillating heaters (with safety shutoffs) for each bedroom and turned off the heat from 7 p.m. until 4 p.m. the next day. Close the vents in any room that are not in use. Use compact fluorescent light bulbs. These changes can reduce your monthly bills by 50%. Buy energy efficient appliances.
There are many ways to skin a cat, so do whatever it takes to create an environment that will allow you to payoff the mortgage early. If you reduce this fixed cost, you will reduce your stress, reduce the strain on your finances, give you an opportunity to change careers, and allow you to withstand job losses and other financial challenges better in the future.
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