Financial literacy - understanding your mortgage and how to become mortgage free sooner

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Improving Financial Literacy

GoMax Solutions - Content team
Sep 27, 2012 - 8:45:33 AM

A little knowledge can save you a lot of money!

For most people buying a home is one of the largest financial decisions they make.  Yet most people have very little knowledge about the mortgage they need to make their home purchase a reality.  Understanding some basic things about your mortgage can literally save you 10's of thousands of dollars.

Little things like paying half  your monthly mortgage payment every 2 weeks (accelerated bi-weekly) instead of a monthly payment for example can help you build over $10,000 more in equity in just 5 years.  It is basically a forced savings plan because you end up paying 26 bi-weekly payments a year or 1 extra monthly payment.  Just doing this will pay off your mortgage approximately 3 to 4 years sooner.  That is a big difference and really does not take a lot of effort or scrimping.

Another great way to build your wealth and become mortgage free sooner is to bump up your payment by even $25 each year.  All of this extra money that you pay goes towards the principle you owe and if you start doing this from day one, can grow into a huge savings. 

It's just making the decision to tackle your debt in a planned out systematic fashion.  Don't worry, you don't have to start that dreaded budget, but you do have to decide what your priorities are and how to accomplish them.  Ask yourself, when do you want to be mortgage free, and when do you want to retire?  Then create the plan to make it happen and stick to it.  Make the plan simple and fool proof because life delivers us all challenges and most of us can justify dipping into that savings jar because we just have to have that new iPhone.  If the extra mortgage payment just comes out of your account automatically every 2 weeks, its amazing how we can make do.

You are not only working towards mortgage freedom you are also getting a decent return on your money.  For every dollar of debt you pay off, you are saving the interest you would have paid on that same dollar.  So if your mortgage interest is 3.50%, then that is the return you are receiving on the extra money you put down and that is a guaranteed return unlike most investments today.  Invest in yourself and start today.

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