Rachel Cruze: A Simple Strategy for Accelerating Your Mortgage Payoff
Owning a home is often seen as a major life milestone, symbolizing stability and success. However, the journey doesn’t stop at just buying a home; achieving financial freedom by paying off your mortgage early is equally important.
In a recent episode of The Rachel Cruze Show, Cruze offers valuable advice on how to pay off your mortgage early, even if your payments are high. Here’s a simplified breakdown of her approach.
### Understand the Why
Before figuring out how to pay off your mortgage early, it’s crucial to understand why you should. Cruze points out that the interest paid on a 30-year mortgage can be incredibly high. By paying off your mortgage early, you save on interest and free up significant financial resources. Imagine not having a house payment anymore—this could mean more money for savings, investments, or simply enjoying life.
### Prepare Financially
The first step is to ensure your finances are solid. Buying a home before you’re financially ready can lead to stress and potential financial problems. Cruze stresses the importance of being debt-free, having an emergency fund, and saving for future expenses before focusing on your mortgage. This foundation puts you in a strong position to tackle your mortgage without risking other financial goals.
### Four Simple Strategies to Pay Off Your Mortgage Early
1. **Make Extra Room in Your Budget**
Start by creating some breathing room in your budget. This could mean cutting back on dining out, canceling unused subscriptions, or finding other ways to save. Redirect these savings towards your mortgage to speed up the payoff process.
2. **Refinance to a 15-Year Mortgage**
If possible, refinance from a 30-year to a 15-year mortgage. This move might increase your monthly payments but will save you a lot in interest over time and force you into a quicker payoff period. Ensure the math works in your favor, considering current interest rates.
3. **Make Extra Payments**
Begin with one extra mortgage payment per year and gradually increase from there. This strategy reduces the principal faster, decreasing the amount of interest paid over the loan’s life. Extra payments directly to the principal can significantly shorten your mortgage term and lead to substantial interest savings.
4. **Consider Downsizing**
If your mortgage payments take up a large portion of your income, downsizing might be a smart choice. Living in a more affordable home can provide the financial flexibility needed to pay off your mortgage quicker and pursue other financial goals, like saving for retirement or your children’s education.
### Take Control of Your Money
Cruze explains that paying off your mortgage early requires discipline, planning, and some sacrifice, but the rewards are worth it. Using budgeting tools, like the EveryDollar app, can help you manage your money more effectively and stay on track. By taking control of your finances and making intentional choices, you can pay off your mortgage early and enjoy financial stability.