Americans are still struggling with mortgage debt – Tips to pay off your mortgage earlier
Reports say that there are certain homeowners who are still reeling from the after-effects of the Great Recession and it may take around a decade for them to recover. According to a real estate company Zillow, the percentage of underwater mortgages, where the worth of the home is lower than the mortgage, has been seen to drop with the recovery of the housing market but more than 5 million US homeowners owe to their banks at least 20% more than the worth of their homes, which totals to $579 billion in the form of negative equity. Homeowners have reportedly said that remaining underwater would likely be the toughest to set themselves free from negative equity.
On the other hand, the rate of underwater homeowners is way much higher among the homes that carry the least value and this has been noticed by using data from credit bureau, TransUnion. In Atlanta, 46% of the low-end homeowners were all underwater as compared to 10% of the high-end borrowing homeowners. In Baltimore, 42% of the low-end homeowners had negative equity as compared to a small 9% of those who owned houses of higher value.
Then what’s the good news?
You must be wondering about the good news among all this negative news of the US housing industry. It has been seen that there were 15 million homes with underwater mortgages during the peak moment of the housing crisis. However, this negative equity rate dropped down to 15.4% of all homes with mortgage loans in the first quarter, that was down from the rate of 18.8% during the same period last year. Hence, it is being seen that the rate of negative equity improved in some of the largest housing markets in the initial quarter of 2015, which is a clear sign of the fact that the nation is continuing to recover from the tough lending rules and the housing market bust.
Are there any ways of paying off your mortgage debt sooner?
The stories of people who pay off a 20 year term mortgage loan throughout a term of 20 years are rare indeed. Nowadays, mortgage debt is something that is pricking people like their credit card debt. They’re desperately looking for ways in which they can repay their mortgage debt sooner and move towards owning their homes. Here are some ways that you can take into account.
- Add some extra amount to every monthly payment: When you make the decision of adding some extra amount to every monthly payment, the biggest benefit is that most of the money is devoted towards the principal of the mortgage. Early in a mortgage loan, most of your payment goes towards the interest rate. If you could add an extra $100 to your payment of a new $100,000 30 year mortgage at 4.5%, you would rather pay it off 8 and a half years early and save around $26,400 in the form of interest rates.
- Pay every 2 weeks: While there are companies that may volunteer to set this up for you, there are some others who won’t allow you pay more than just the scheduled amount. You can even do it yourself for nothing. When you pay every 2 weeks, you are actually making a full extra payment every year. This could cut off your time from the term of your loan and allow you to save a huge amount, as per a mortgage calculator. When you split your mortgage payment into 2 pieces, this produces minimum savings.
- Make extra payments whenever possible: Whenever you’re able to save a little bit more than what you need to save, devote that bit of money towards making additional payments on your mortgage loan so that you can get rid of mortgage debt sooner.
- Refinance your mortgage: Just like you require debt consolidation information when you have too many defaults on your credit cards, you may even require refinancing your mortgage loan with a new loan. With the favorable terms and conditions of the new loan, you can easily be able to repay your actual mortgage sooner.
- Cut down expenses and use the savings: You can cut down some household and personal expenses here and there so that you can save a little bit more. The extra money that you get by curbing your expenses, you can devote towards your monthly mortgage instalments. Live a frugal life for the time-being but that will be worth the struggle in the long run.
So, when you dream of paying off your mortgage debt sooner than the scheduled time, you may take the above mentioned steps to realize your dream. Just speak to your lender so that you get to know about the penalties or fees for pre-paying your home loan.