Saturday, March 3, 2012

Pay Off Mortgage Early To Save Money


By Marcie Geffner, Associated Press
Paying off your mortgage might sound like an ambitious plan, especially if you have recently refinanced into a 30-year term. But it's still smart for homeowners to give some serious thought as to how they'll pay off their home loan; if not in 2012, then sometime.
An early mortgage payoff can net substantial interest savings compared to making scheduled payments for 15 or 30 years.
Paying more quickly reduces your housing cost, freeing up that money, says Ronit Rogoszinski, a wealth adviser at Arch Financial Group in Garden City, N.Y. You'll still be responsible for property taxes, homeowners insurance, and home maintenance and repairs.
Some might argue for allocating more cash to investments instead of eliminating low-cost debt, says Alfred McIntosh, principal of McIntosh Capital Advisors. But he encourages homeowners near retirement age to be mortgage-free.
To pay off your mortgage early:
- Add an extra amount, say $50 to $500, to each monthly payment, Rogoszinski says. Don't sacrifice necessities, such as sustenance or medical care.
Some homeowners add enough to their monthly payment to make one extra payment each year. McIntosh explains the math: Divide one payment by 12 or multiply one payment by 10 percent, and add that to the amount each month. Make sure the extra money is applied to principal, not interest or your escrow account.
One way to make that extra payment less painful is to make payments every two weeks instead of every month. The result is 26 half-payments instead of 12 full payments. McIntosh says biweekly payments can knock approximately six years off a 30-year term.

clear skies,
Doug Reynolds

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