The implications of an accelerated mortgage are that you are choosing to pay extra on your payments each month. This allows you to reduce the amount of time needed to pay off your mortgage. According to statistics, most home buyers pay off the total interest within the first five years. There are three essential opportunities to utilize an accelerated mortgage.
Tips for paying off your Mortgage Quickly
Bi-weekly payments are often used in accelerated mortgages. This allows you to divide one month’s payments by 26, allowing you to pay 13 monthly payments instead of 12. The additional portion to generate the thirteenth payment is submitted every two weeks. This helps you reduce the interest rate your lender gave you.
Home buyers use this strategy often to reduce the total value. With earlier pay-offs, the borrower can avoid higher interest values and pay more on the principal. The principal is the true value you owe your lender.
What is the 1/12th Method?
This method requires that you identify this percentage of your monthly mortgage payment. The payment is divided by 12 to arrive at this calculation. To accelerate the mortgage, you add this value to the payment when you submit it to the bank. However, you aren’t restricted to this value only. Since this method is considered a do-it-yourself opportunity, you could add more to the payment when funds are available.
Using an Amortization Schedule
This schedule helps you identify the value of the principal you pay each month. This tactic is used to reduce the total impact of the interest. With this early payment option, you pay more to the principal instead of interest only. It reduces the total value that you actually borrowed. This reduction decreases the interest charges applied to the total mortgage.
Decreasing the total value of your mortgage helps you achieve an early pay-off. Buyers who choose these opportunities could reduce their loan term by up to five years or more. The implications of an accelerated mortgage provide an opportunity to settle debts quickly. To schedule a FREE consultation, contact your preferred attorney.
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