1. Eliminate Small Debts First
No debt is considered good debt to have. The small debts are easy to tackle and can free up some additional funds to pay off much larger debts every month. By getting rid of the lowest amount first, the feeling is rewarding and will carry momentum forward to start chipping away at all personal debts.
2. Tax Return Distribution
A big percentage of adults use the money rewarded through a tax return to fund a large purchase each year. While having a new big screen TV is exciting, the money spent on this item could go towards paying a lump sum to an outstanding rental mortgage. By re-distributing tax returns, a person can cutoff months of mortgage payments each year to get to a payoff point faster.
3. Quarterly Lump Sum Payments
When a mortgage is taken out, a lender makes sure that a person has enough income to meet a minimum payment. Most adults have the ability to pay two times the cost of a monthly mortgage without taking on more debt. By making four quarterly payments of an extra mortgage payment annually, a rental home can be paid off at a much faster rate. This method shaves off four months of payments every year.
4. Division of 12 Rule
Someone who cannot make an extra four payments annually can take advantage of the division of 12 rule. The current monthly mortgage payment can be divided by 12 to come up with a number that can be added every month to a regular payment. This helps cut down the principal on a mortgage without having to increase a salary or use tax returns for additional payments.
5. Refinance Current Mortgage
It is likely that someone who is paying more than six percent interest on a rental home would benefit from a lower rate. A 30-year mortgage is common although lower interest rates can now be found through some lenders for a 10 or 15-year period. By refinancing down to a smaller mortgage, a home could be paid off faster while continuing to apply other methods in this list.
6. Establish a Payoff Date
Most people work well towards paying off debts when a goal is established. Picking out a time period to payoff the mortgage can help keep things in line to ensure that the goal is met. When people stray from a goal, it is harder to get back on track each month.
7. Add Bi-Weekly Payments
Most all lenders calculate interest on a monthly basis. By paying mortgage payments in bi-weekly installments, the principal is lowered and more of the payment will not go toward interest. This provides two payments monthly to reduce the overall mortgage amount. Some lenders can setup these payment plans although some can impose fees for this service.
8. Round Up Payments
Not every mortgage is exactly $500, $300 or $800 monthly. It is very common to be at or below the extra $50 threshold for a mortgage payment. If a payment is $527.00 monthly, extending this payment to $550.00 monthly can knock a lot off of the total amount of the loan. These extra payments add up quickly over the course of several years.
9. Get Rid of Escrow
Property taxes are usually placed into a special escrow account to make sure that these are paid on time. Mortgage companies usually charge a fee for this service at the time of loan origination. By eliminating escrow, a person can place his or her own money into a high interest savings account and save up for property taxes or insurance payment on the rental. This allows extra income to be earned that will not go directly to a lender.
10. Increase Earnings
By boosting annual earnings, more money can be put towards paying off a mortgage each year. Many people receive annual raises although never pay more towards their mortgage. Taking a percentage of increased earnings and putting it towards the rental mortgage payment each month can help a person get to a payoff faster.