In this blog we will explore the advantages of paying off your mortgage early or making a payment ahead of the monthly schedule. Yes, it may seem like an impossible commitment, with all the other competing financial commitments that homebuyers have. The bottom line is that it is possible. Like any other goal worth achieving, you need to be intentional, determined, and disciplined. It all ties back to being financially literate and being smart with how you spend your hard-earned dollars.
Why would one want to pay off their mortgage earlier?
The homeowner saves a lot of money which otherwise goes towards servicing interest on the principal debt, when settling the mortgage earlier than originally scheduled. Early settlement results in shaving off years of mortgage repayments.
Early settlement may require disposable income and discipline in budgeting
Not everyone has disposable income, however there are ways of structuring your finances in such a way that we realize some level of disposable income. Below are some of the ways:
Cash from an annual salary increase – plan to add the percentage of your salary increase towards your regular monthly mortgage payments.
Drawing up a strict budget and have the discipline to stick to it until the goal is achieved.
Since interest rates are calculated daily, paying earlier in the month or before the scheduled date, means less interest accumulated, and cut years off your home loan, in the long run.
Renting out your property or part thereof, means that you have other people paying your mortgage. However, your property needs to be in good condition and have adequate security to attract quality tenants that will not give you problems with rent payments.
For more information on the subject of home buying and home ownership visit the following links:
Look out for Part 2 of Paying Off Your Mortgage Earlier Than Scheduled
Compiled by Mpume Nyandu, HPP Cares' Director: Stakeholder Relations