Many conventional home loans are between 20 and 30 years long. This length of time can be daunting for even the youngest and most spry homeowners. However, there are methods now that allow for a long mortgage loan to be repaid much faster than a conventional amortization schedule. There are several ways to accomplish this feat, but a few standout programs can easily and quickly help you achieve a free and clear home.
The best and most manageable mortgage acceleration program is the biweekly payment structure. This is the most popular and best option because it's a realistic approach to speeding up your mortgage repayment. In this program, you simply make a half of your monthly mortgage payment every two weeks. At the end of the year you will have made 26 half payments, or 13 full payments, on the mortgage loan. Over the life of a 30-year loan, this shaves between five and six years off your loan repayment.
Automated Biweekly Payments
This structure is the same in theory as the first and best option. However, with an automated biweekly payment, you are guaranteed the interest and year savings. Biweekly payments shave years off the loan because, by making an extra payment each year, you will actually pay off the loan several years (as many as four or five) before it's scheduled to expire. If you choose to do a biweekly payment plan on your own, you run the risk of missing a payment -- after all, making a payment every two weeks in addition to other bills might not work all of the time. Most mortgage lenders offer an automated payment system that helps you save on these mortgage interest charges.
Mortgage Accelerator Programs
A newer type of mortgage accelerator program takes a different, more aggressive approach. In this system, your mortgage company offers you a line of credit into which you deposit your full monthly income. At the end of each month, the unspent money in this account is attached directly toward the principal balance of your mortgage account. Therefore, depending on your expenses each month, you could end up shaving far more years off your loan than with a traditional biweekly payment scheme. The minimum required amount that you have to pay is the actual mortgage payment (with no additional payments on top), but remember that, according to Bankrate.com, these programs normally come with an annual fee between $30 and $60.
One factor to keep in mind prior to engaging in a mortgage acceleration scheme or program is the cost of a prepayment penalty. Some mortgage companies charge a fee for paying off a loan prior to the expiration of the original amortization schedule. Make sure to read the fine print of your mortgage contract before starting a mortgage acceleration plan -- particularly if you plan to repay the principal balance of your loan aggressively.
Based in Eugene, Ore., Duncan Jenkins has been writing finance-related articles since 2008. His specialties include personal finance advice, mortgage/equity loans and credit management. Jenkins obtained his bachelor's degree in English from Clark University.