Pay off Your Debt
In a perfect world, debt would not exist. However, in
today’s world of credit cards, mortgages and college loans, almost all of us
have some debt. If you are one of the many who have debt, it is time to make a
change. If you are financially secure, reducing your mortgage should be a major
financial priority. Read below to find out how to get it done.
Do you sometimes feel in debt to your loved ones? Maybe they
help you to maintain a healthy and safe lifestyle, but it’s at a cost of their
valuable time and your independence. Wish there was a way you could get back
your safety and security without going into debt with the cost of senior care?
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face, Life Alert’s dispatch team can send you the proper authorities fast.
Plus, because it is lightweight and waterproof, you can wear it discreetly
under your clothes or even in the shower too. Eliminate your debt to yourself
and family by getting Life Alert Protection today!
Regardless of what you owe on your house, Real Simple[1]’s
experts think that zeroing out your housing costs is a smart money move. Find
out the best ways to do it by reading below.
1. Refinance to a
lower interest rate. Despite rock-bottom rates, millions of
creditworthy Americans have not yet refinanced. And that's a shame: Borrowers
who refinanced during the second quarter of 2012 lowered their rate by an
average of 1.5 percent. For a $200,000 home loan, that translates to savings of
about $2,900 in interest payments over the next 12 months, according to Freddie
Mac. (To calculate how much you could save, use the refinance calculator at
Money.CNN.com, which, like Real Simple, is owned by Time Inc.) If you plan on
staying in your home for at least three more years and your mortgage is at
least $100,000, with an interest rate of 4.75 percent or higher, ask your
current loan servicer or lender for its best refinancing rate. Then compare
that with rates at banks that you already have accounts with. Or you can opt to
work with an independent mortgage broker to find the lowest rate, says Keith
Gumbinger, the vice president of HSH.com, a mortgage-information site. If you
can reduce your current interest rate by .75 to 1 percent, go ahead and
refinance. To help the process go smoothly, gather the following paperwork:
proof of income (two recent pay stubs), copies of asset information, your tax
returns for the previous two years, and proof of investments and other income.
Additionally, be prepared to offer explanations for any recent income
irregularities, credit inquiries, or job gaps. "Lenders question these
situations because they could be an indication that you can't afford your
current loan," says Gumbinger.
2. Refinance to
shorten your loan's time frame. It's becoming increasingly popular for
home owners—even those on tight budgets—to refinance their 30-year fixed-rate
mortgages to 20- or even 15-year ones. Today's low rates allow you to do this
while keeping your monthly payment fairly close to the current amount, says
Erin Lantz, the director of Zillow's Mortgage Marketplace, a real
estate–valuation website. Say you've been making payments on a 30-year, 6
percent fixed-rate mortgage of $200,000 for five years. If you refinance to a
15-year, 2.87 percent fixed-rate loan (typical at press time), for example,
your payments will increase by less than $80 a month. Yet you would pay off the
loan 10 years earlier, build equity faster, and save an astonishing $130,477 in
interest.
3. Make a lump-sum
payment. Did you receive a tax refund? An inheritance? Or come across a
small stash of cash? Consider applying some or all of this money to your
principal balance. "This is one of the best strategies you can employ,
because you're not required to make a higher monthly payment," says
Gumbinger. "And you didn't count on having the money in the first place,
so you won't miss it." Making a single $5,000 payment on, say, a 30-year,
4.5 percent fixed-rate mortgage of $225,000 would save a home owner more than
$13,000 in interest and reduce her repayment term by 15 months. Take note: Call
your lender to verify that your mortgage doesn't have a prepayment penalty. If
it does, you could be hit with a fee—usually 1 percent of the loan amount.
4. Switch to
biweekly payments. Simply by making half your monthly payment every two
weeks, you will chop off almost six years off a 30-year mortgage, says Greg
McBride, a senior financial analyst. Not to mention that you'll save tens of
thousands of dollars over the life of the loan. All you have to do is contact
your lender to change your payment schedule (be prepared to pay a onetime setup
fee of $250 or more). Remember that twice a year, you'll be making three
payments a month instead of two, so be sure that there are enough funds in your
bank account.
5. Round up your
payment. Every little bit—even if it's just $20 or $50 a month—that you
pay toward your principal is less that you'll ultimately pay in interest. For
instance, maybe you have a monthly mortgage payment of $954.83. If you round up
the payment to $1,000 by putting in an extra $45.17, you'll pay off your debt
two years and five months early. (Use the round-up repayment calculator at
HSH.com to calculate your savings.) "This is a great option for anybody
with a little additional cash, especially someone who has already refinanced or
who doesn't qualify for refinancing," says Gumbinger.
With the tips above you can start to gain control over your
debt and lower your financial stresses. By decreasing and even eliminating your
mortgage, you can invest your money into better things such as personal
protection. If you are an aging senior who is looking to maintain your
independence and avoid senior care, Life Alert is your answer. Slip on their
lightweight, waterproof emergency pendant and in the face of any life
threatening emergency, summon help fast with just one touch of a button. No
matter when danger may strike, Life Alert’s dispatch team can send you the
proper authorities fast, 24/7. Don’t go into debt trying to find the right
emergency medical device, instead, get the best by getting Life Alert
Protection today! Call 1-800-513-2934 for a free Life Alert brochure.
Works Cited:
1.
Gibbons, Vera. “How to Pay Off Your Mortgage
Early.” Real Simple. 2 January
2019. <https://www.realsimple.com/work-life/money/saving/pay-off-mortgage-early
>.