Just a few days ago, someone asked , "How Can I Shorten The Years of My Mortgage?"
Indeed that is the key issue here, and that's what I intend to briefly explain to you here. I won't dive deep into all the details, but I'll give you a quick response here.
Why Mortgages Last So Long In The First Place
To begin to see how you can dramatically shorten the years of your mortgage, we have to look at 2 things: principal and interest.
I'm sure you know what these 2 are, but let me re-establish something here so that you know where I'm coming from: As long as there's always a remaining balance on your owing of the principal, you'll always have payments to make, no matter how low the interest rate is.
Keep that in mind.
The real problem in a mortgage is the principal.
Having said that, have you ever asked yourself how your monthly payments are being allocated toward your principal and the interest?
That is, what portion of your monthly payments go toward cutting down the principal, and which portion goes toward the interest?
Though I don't know your exact situation, I can wager that if you're in the US, what happens is the overwhelming majority of each payment goes toward your interest, NOT your prinipal.
A few weeks ago, one of my friends told me that one of his friends was furious to learn that, of each payment he was making, only about $50 was going toward lowering the principal.
My buddy's friend was lucky. Most American mortgagors never find this out. That's how we're misled into paying for our mortgages decades longer than we otherwise might.
You see, by diverting most of each of your payments toward your interest, and mostly ignoring the principal, you're being forced to continue to make payments for a long, long time--much longer than you have to.
Remember, we've established that the real problem in a mortgage is the principal, not the interest. As long as there's a balance of owing on the principal, you'll always be making payments.
Because the interest is calculated on the principal, any payment that goes toward the interest, instead of the principal, ensures that there will always be principal remaining.
And because the interest is calculated on the principal...
...so goes the seemingly endless cycle of unnnecessary mortgage payments.
How To Shorten The Length Of Your Mortgage
So the question now is, how do I put more money toward lowering the principal?
Well, I'll tell you one thing: your bank won't want to make it easy for you, if they'll even allow it.
Basically, you have to find a way to make sure the majority of your montly payments are going toward your principal, and not your interest.
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