How to Pay Off your Mortgage Early

Salaam African Bank: How to Pay Off Your Mortgage Early

How to Pay Off Your Mortgage Early

Most home owners still do not own their homes outright. While mortgages are fantastic tools that can put owning your dream home within reach, it is natural to want to be free of financial obligation as soon as possible. If you are interested in paying off your mortgage early, the first question to ask yourself is whether that is really the most advantageous move. If you have a retirement fund with higher returns than the interest on your mortgage, or if you have an employer who matches your retirement contributions, it may actually make more financial sense to invest your extra money rather than put it towards your mortgage.

If, however, you want to make it your first priority to be mortgage free, the first thing you’ll want to do is speak to your bank and let them know that you want to begin paying your mortgage aggressively. They should have good advice about the best way to reach your goals, and you can also ensure that your extra payments are being credited as you intend them to be, rather than towards the next month’s payment, for instance. Once you’ve worked out a plan with your bank, here are some of the best strategies to own your house as soon as possible.

Add Extra Payments

Divide your monthly payment by 12% and add that amount to each payment. This will effectively mean you are making 13 payments each year, which can shave years off your mortgage and save you lots of money in interest. Some people choose to reach the same goal by making a payment every two weeks. You can also try adding an extra payment each quarter to move a little faster still.

Round Up

If you want to make movement but can’t afford a full extra payment, you can also try simply rounding up each month’s payment to the nearest round number. This puts a little extra towards your mortgage each month without ever saddling you with the full cost of another payment all at once.

Throw in the Extra

Every time you find yourself with some extra money like a bonus at work, an unexpected windfall, or a tax return, send it straight over to your mortgage. This method has the advantage of never dipping into your primary income or shrinking your everyday budget. However, it is very difficult to say how much time you are saving as it is impossible to predict when you will have extra money to contribute.

Refinance

The most straightforward way to pay off your mortgage early is to refinance. Often you can even get a lower interest rate by doing this. There are usually fees and costs associated with refinancing, however, so unless the interest rates are significantly better, you may choose to simply act as if you refinanced and commit yourself to paying off your mortgage in 15 years even though your paperwork says 30.

 

You can use this handy mortgage payoff calculator to help you plan for your future using any of these methods.

Investments Made Easy: A Simple Guide to Savings, Index, and Mutual Funds

Salaam African Bank: Investments Made Easy- A Simple Guide to Savings, Index, and Mutual Funds

Investments Made Easy- A Simple Guide to Savings, Index, and Mutual Funds

If you have any significant amount of money that you know you won’t need to spend for a few years, you likely want to invest that money so that it works for you to increase in value while you don’t need it. You also know, however, than investments are risky — you could win big and make money with very little work, or you could lose your initial investment just as easily. Investing can be extremely complicated, and most of us don’t have the time or the inclination to study the market and carefully manage an investment. Luckily, you don’t have to. Here is a basic breakdown of the three main choices when it comes to investing your money without managing your own stocks.

Savings Accounts

Although not typically viewed as an investment, a good savings account meets all the criteria. When you don’t need to spend your money right away, you can put it in an account and essentially lend it to the bank in exchange for a higher profit margin. Over time, you will turn a modest profit. Savings accounts tend to be some of the lowest yielding investments, but they are extremely safe. You do not stand to lose your initial investment, and you can also access your money and make withdrawals at any time and with little to no notice. The balance does not, however, increase to match inflation.

If you don’t need the advantage of liquidity and won’t need to withdraw your money for some time, you can opt for a Certificate of Deposit, which offers the same safety along with higher profit margins in exchange for restricted access to your money for a set period of time.

Index Funds

If you want a higher return on your investment and to keep pace with inflation, you must also accept the higher level of risk that comes with buying stocks, or shares in ownership of a company. Linking your financial future to the market value of one or several specific companies is the most volatile option, and may result in both great gain and great loss.

You can, however, invest in stocks for a more modest return and much less risk with an Index Fund. And Index Fund spreads your investment out across the entire market by buying a representative sample of stocks. This means that if any one company does poorly, your own investment will not go down with it. Your returns will be tied to the overall health of the market, which almost always increases over long enough periods of time.

Actively Managed Mutual Funds

Actively managed Mutual Funds are Index Funds that are carefully curated and overseen by an expert who actively chooses which stocks make up your fund at any given time and makes trades according to their best predictions of the market. The goal is to outperform the market, resulting in higher gains for their investors. Of course, there can be no guarantee that these goals will be met, and even the experts are sometimes wrong, resulting in higher losses. Because the funds are actively managed, they also charge larger fees.