Paying Off Your Principle Pays Off
_Buying your first home is an exciting time. It’s typically the biggest purchase you’ve made yet and comes with all sorts of financial opportunities. Determining the best way to maximize on the benefits of owning your own home is one of the fastest way to putting yourself on the path to financial freedom.
There are several things you can do to make the most out of your new purchase. Taking advantage of tax breaks, making structural or landscaping improvements to raise the value or capitalizing on rental opportunities are all excellent ways to make money from your new home. In general, though, the quickest way to make money from your home is to eliminate the part that takes money from your hand – interest.
When you first buy a home, most of what you’re paying on your mortgage in the beginning is interest. If you look at the chart mortgaging your pay back projections, you might be surprised to notice that typically, on a $200,000 loan payment of $2000 a month, just about $200 is paid towards the principle. Well, you put $1800 in the bank’s pocket – wouldn’t you rather pay yourself with that $1800 as soon as possible?
Some people will argue that interest is a tax write-off, so it benefits you to pay it. Sure, if you subscribe to the philosophy that letting money out of your hands with the hope of getting it back later is a good thing but debt like this also weakens your freedom and financial position. It’s also within your interest to pay it off as soon as possible.
The most missed money saving opportunity in paying down your mortgage is the value of setting up a bi-weekly payment system. Our calendar has five weeks in some months and four weeks in others. This means you’re missing a prime opportunity to whittle away at your debt by making a simple change that you’ll barely notice.
Tip: Set this up on a bi-weekly direct deposit payment; otherwise, you’re likely to miss payments as they are so frequent.
Another way to pay down your principle fast is by simply paying $50-100 more towards your principle on every payment. That shouldn’t be enough to cripple your budget and it certainly won’t feel like you’re doing that much more but when you think about our example above, with only $200 actually going to the principle, you’re increasing your direct principle payment by 50%!
Just be certain to let your mortgage company know this overage money MUST be applied to your principle. Otherwise, it will simply go towards your overall bill.
One final thing you can do to pay off your mortgage early is get some help. If you live in a college town or even a semi-large city, there will always be a tenant looking to rent a room. Obviously, look hard and long before you get yourself into a financial commitment with someone you don’t know moving into your home, and be certain to find out all the tax and insurance information in your area regarding this move.
But if you can finagle a good set-up with a respectful tenant, having that extra couple hundred dollars to throw at your principle every month will pay you back tenfold in the long run.
When you pay off your mortgage as quickly as possible, you are setting yourself up for financial freedom. You will be the one pocketing that interest, not the bank. Now that return on your investment is guaranteed!
There are several things you can do to make the most out of your new purchase. Taking advantage of tax breaks, making structural or landscaping improvements to raise the value or capitalizing on rental opportunities are all excellent ways to make money from your new home. In general, though, the quickest way to make money from your home is to eliminate the part that takes money from your hand – interest.
When you first buy a home, most of what you’re paying on your mortgage in the beginning is interest. If you look at the chart mortgaging your pay back projections, you might be surprised to notice that typically, on a $200,000 loan payment of $2000 a month, just about $200 is paid towards the principle. Well, you put $1800 in the bank’s pocket – wouldn’t you rather pay yourself with that $1800 as soon as possible?
Some people will argue that interest is a tax write-off, so it benefits you to pay it. Sure, if you subscribe to the philosophy that letting money out of your hands with the hope of getting it back later is a good thing but debt like this also weakens your freedom and financial position. It’s also within your interest to pay it off as soon as possible.
The most missed money saving opportunity in paying down your mortgage is the value of setting up a bi-weekly payment system. Our calendar has five weeks in some months and four weeks in others. This means you’re missing a prime opportunity to whittle away at your debt by making a simple change that you’ll barely notice.
Tip: Set this up on a bi-weekly direct deposit payment; otherwise, you’re likely to miss payments as they are so frequent.
Another way to pay down your principle fast is by simply paying $50-100 more towards your principle on every payment. That shouldn’t be enough to cripple your budget and it certainly won’t feel like you’re doing that much more but when you think about our example above, with only $200 actually going to the principle, you’re increasing your direct principle payment by 50%!
Just be certain to let your mortgage company know this overage money MUST be applied to your principle. Otherwise, it will simply go towards your overall bill.
One final thing you can do to pay off your mortgage early is get some help. If you live in a college town or even a semi-large city, there will always be a tenant looking to rent a room. Obviously, look hard and long before you get yourself into a financial commitment with someone you don’t know moving into your home, and be certain to find out all the tax and insurance information in your area regarding this move.
But if you can finagle a good set-up with a respectful tenant, having that extra couple hundred dollars to throw at your principle every month will pay you back tenfold in the long run.
When you pay off your mortgage as quickly as possible, you are setting yourself up for financial freedom. You will be the one pocketing that interest, not the bank. Now that return on your investment is guaranteed!