Over Payment Options To Accelerate Your Mortgage

Here is the typical mortgage financial advice to accelerate your mortgage. This involves reducing your lifetime mortgage interest paid by paying off your loan sooner.

Do one of the following options:
1) Refinance to a lower rate (can cost several thousand dollars to refinance)
2) Make bi-weekly mortgage payments (basically make one extra mortgage payment every year)
3) Round up your mortgage payments to nearest $100 – if your payment is $1950, just round up to $2000 (just slightly overpay principal each month)

Let’s have a look at these:

1) Refinance can be a smart way to take advantage of lower rates, but you have to qualify and potentially go through lots of red tape to get there. Also the fees to do this process are sometimes added onto your mortgage (rather than being paid out of pocket). Adding fees on to your mortgage could ultimately increase the amount of time taken to pay it off by 1 year to 3 years. This can be great long term decision if you plan to stay in your house for more than the next 5 years, but does have significant short term costs.
You can refinance to a lower 30 year mortgage rate, or take out a 15 year mortgage which typically has a lower rate. The only advantage to a 15 year mortgage is that typically you can get a lower interest rate than a 30 year mortgage. You can “create” a 15 year mortgage, by overpaying on a 30 year mortgage. Remember that a 15 year mortgage is really just a 30 year mortgage with extra principal payments!

2) Make bi weekly mortgage payments – this means that every 2 weeks you make a payment to your mortgage provider, instead of every month (e.g. for example if your monthly payment is $2000, you would make payments every 2 weeks). Over the course of a year, you would have paid. This is really just the same as making a one off annual principal payment, but it automatically enforces the discipline of doing this every 2 weeks through the year. This “bi-weekly” method is really just standard principal overpayment.

3) Round up your mortgage payments, so that you automatically overpay by a small amount each month. This is really identical to the “bi-weekly” method, you are just doing it with less principal each time.

All of these methods can be great methods to run – but they all have one massive disadvantage – they all use your own money.

The Float My Mortgage method uses this over payment technique, but allows you to super charge it using other people’s money to overpay many months in advance. You are taught how to get a “loan” at 2% and use that for mortgage payment months in advance. This saves you hundreds of dollars in mortgage interest in two ways: by overpaying in the standard way and by paying months in advance with other people’s money.

The Float My Mortgage method can be used as a “super-charged” over payment method.