Owning a home is one of the wisest financial decisions a person can make. Not only will you be investing in a property of your own, rather than giving rent money to a landlord, but you can also get locked into a fixed rate mortgage for the next 15 or 30 years. A renter doesn’t know when or if his rent is going to go up, and as the cost of living increases each year, so will his rent. Not so for a homeowner.
But, paying off a home can still be a daunting task. In fact, The Consumer Financial Protection Bureau says that the number of people over the age 65 who are still paying off a mortgage has increased in recent years.
CFPB Director Richard Cordray says, “As more seniors carry significant mortgages into retirement, they put themselves at risk of losing their nest eggs and their homes.”
So what should homeowners do now to help protect their financial future and pay off their mortgage before they reach their golden years?
Here’s a simple trick which comes to us from millionaire and wealth management expert David Bach: break up your mortgage into bi-weekly payments, rather than monthly.
In other words, if your mortgage payment is $2,000 a month, pay $1,000 every two weeks, rather than $2,000 all at once.
This simple trick will make it so that you make 26 half-payments per year, rather than 12 full payments. 26 half-payments equals 13 full payments. In other words, someone who pays their mortgage bi-monthly is making one extra mortgage payment per year.
With this easy, manageable financial adjustment, you will be able to pay your mortgage off quicker, saving money on interest and getting that much closer to financial freedom.
Bach told CNBC that over the life of the average American mortgage, this trick could help a homeowner save $44,000 in interest! And that’s certainly nothing to sneeze at. Of course, the amount each person can save completely depends on their specific loan amount and interest rate, but you get the idea.
Wondering how much money you would save with this trick? Use this super handy Bankrate mortgage calculator to figure out how much bi-monthly mortgage payments could save you.
What a great tip! How have you saved money on your housing costs? Let us know in the comments on Facebook!