Mortgage Payments

If your personal budget is similar to many other people’s budgets, your home mortgage payment is by far the largest expense that you pay for each month. In fact, this payment may easily account for 20 or 25 percent or more of your take-home income. Understandably, you may be focused on trying to pay this expense off early. By focusing on this payment, you can build equity and may be able to achieve financial security more quickly. You simply have to find a way to put aside a bit of extra cash regularly so that you can make extra payments, and there are few easy ways that you can consider.

Use Your Tax Refund

First, if you are one of the many taxpayers who receives a refund each year, consider setting aside some or all of this refund to reduce your outstanding mortgage balance. Some taxpayers may have such a sizable refund that it can account for two or more mortgage payments each year. However, even a few hundred dollars extra put toward your principal balance will save you a considerable amount of money in interest charges over time and will have a wonderful effect on your balance.

Earmark Your Annual Bonus

If you are lucky enough to receive an annual bonus each year, you may consider using this to pay down your principal balance. While you may usually spend this money on extra holiday gifts or just add it to your spending cash, you can benefit more substantially when you contribute it to your effort to pay down your mortgage.

Use An Automated Draft To Create a Fund

Another great idea that will work well for all individuals is to create an automated draft from your checking account each month. You may set aside the funds in a special account, and you can make an extra mortgage payment from this account periodically. Another idea is to set up auto payments for your mortgage that are higher than the amount due. For example, you may establish auto payments that are $50 or $100 more than your scheduled payments.

Paying off your mortgage earlier can be a life changing event for you. Simply imagine how different your life would be if you were not responsible for this payment each month. The fact is that this could be your reality sooner than you think if you follow these tips. For the best results, apply two or even all three tips to your efforts.

Some people try to apply for as small of a mortgage payment as they can reasonably afford to, and there is some prudence associated with this line of thinking. After all, recent economic events have shown that those who get over-extended may wind up in a dire financial situation. However, there are also benefits associated with a higher mortgage and buying a slightly larger home if you can comfortably afford to do so.

For example, the rate of growth on equity will typically be more significant, and there are tax deductions and tax advantages that may be greater. If you are preparing to take on a larger mortgage payment that is reasonably manageable for you, you may do so with greater confidence when you follow a few tips.

Reduce Your Debts Beforehand

The best way to ensure that your larger mortgage payment is still affordable for your budget is to reduce your debts. When you think about the difference between carrying $800 per month in credit card payments or the equivalent in a higher mortgage payment, you will see that the benefit lies in the mortgage payment. The credit card payments typically will be mostly interest that has no benefit to you.

The mortgage payment is building equity through principal reduction on an asset, and the interest has tax benefits to you. However, you want that extra $800 per month in payments to be affordable. If possible, pay off or greatly reduce your credit card debt before you take on a new mortgage. In addition, close most existing credit card accounts so that you do not accumulate additional debt while you are responsible for the higher mortgage payment.

Increase Your Personal Savings

Then, increase your personal savings if necessary. The best budget with a higher mortgage payment is one that still allows you to save money regularly. If you are unable to save with your higher mortgage payment, there is a good chance that you may be taking on a little too much debt for what you can afford.

Ideally, you will have at least three to six months’ worth of your expenses on hand in cash and available to access in a worst-case financial situation. You will be able to sleep easier at night with your higher mortgage payment when you have the extra cash available to support yourself in the event of job loss, serious illness or other related events.

Your higher mortgage payment may help you to live in a nicer, larger home, to enjoy better tax deductions and to build equity at a faster rate. However, you want your mortgage payment to be affordable. By following these tips, you can confidently take on the larger payment.