Mortgage-free living? It's possible to pay it off with these strategies

A house marks the largest purchase many Americans will make. Whether you sign up for 15 or 30 years, you feel your mortgage debt will never be paid off. Yet with minor adjustments, you can live mortgage free.

Mortgage-free living: Does it make sense?
Some financial advisers argue higher returns can be obtained beyond the benefits of paying down a mortgage. While the theory holds some truth, it doesn't tell the whole story. Even when mortgage rates are low, paying off a mortgage may be the homeowner's highest return for the least risk. Living mortgage free minimizes monthly expenses, offering flexibility in employment and discretionary spending. Don't cling to your mortgage for a tax deduction. The tax deductible amount is a percentage of the total interest expense. You're spending dollars to save pennies.

Refinancing strategy
You may find it easier than you believe to free up funds to eliminate your mortgage. Research mortgage interest rates to know if you have the best available. Lower interest rates provide greater progress for the same monthly payment. Before refinancing, weigh any upfront costs against the anticipated savings. Fifteen-year mortgage interest rates are often lower than 30-year rates, and you will pay half as long for less than twice the payment.

Extra payment strategy
Talk with your lender about bi-weekly payments. If you are paid every other week, you can contribute one-half of your mortgage payment from each paycheck. With 26 bi-weekly pay periods each year, you will make 13 payments. If you used more than one mortgage to purchase your home, tackle the smaller second mortgage first. A second mortgage frequently carries a higher rate. When it is gone, you can use the newly available funds to make headway on the primary mortgage.

Spare change strategy
Examine the household budget. Don't have a budget? Make one now. Setting categorical spending goals stems leaks in your cash flow and lets you allocate extra cash to becoming mortgage free. Set aside a part or the whole of any extra income such as a bonus, overtime pay, or a gift to your mortgage payment. Make it a game to save extra money and periodically apply your stash to the mortgage payment. Ideas for savings games include setting aside pocket change or every bill of a specific denomination.

What to do when it's gone
Chart your progress using an amortization chart, and celebrate when you send the last payment to the lender. If your mortgage payment included escrow for property taxes and insurance, you will want to make provisions. The easiest way to do this is to set up automatic transfers for one-twelfth of the total from a checking account to a savings account each month. When the bill comes due, you will have the funds available. Enjoy your new-found freedom, and set goals based on your new financial situation.
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