Awesome Wealthy Woman's Strategies For Paying Down Debt

When most people think about their debt, they think about the ‘big 3’ – mortgage, car loan and credit cards.

There are different strategies for each type of debt, which I’ll cover in the next couple of blog posts, so let’s dive right in…

Mortgage

This is likely the biggest debt you will ever assume and it is not to be taken on lightly.  You may be familiar with stories of folks who were talked into buying more house than they could really afford and then getting stuck with huge mortgage payments and, sometimes, foreclosure when they couldn’t keep up on their payments.

Strategy #1 – Pay Your Mortgage Bi-Weekly

This is the single biggest contribution to reducing your cost of borrowing.  Yes, your mortgage is a loan.  Granted, it’s one that can span up to 25 years for repayment but you must remember that the longer you take to pay it down, the more interest you are going to pay.

When you pay your mortgage bi-weekly, you will automatically shave years off your amortization period, saving yourself thousands of dollars in interest.

For example, when we chose a bi-weekly payment, our 25-year term was reduced to 22 years and 4 months right from the start  – saving us the interest we would have paid on those 2 years and 8 months.

Strategy #2 – Make Lump Sum Payments

Please note – not all mortgages allow you to make lump sum payments so double-check the terms of your mortgage to find out if and when you can make lump sum payments and to what maximum amount each year.

If you are able to make lump sum payments, these will go directly toward the principal amount of your mortgage, reducing it faster and costing you less interest.

In our case, we were allowed to make lump sum payments up to a maximum of 15% of the original mortgage amount each calendar year.

When you make your regular mortgage payments bi-weekly and make additional lump sum payments in the weeks between regular payments, you will see your balance owing drop significantly.

Just by using these two strategies, our 25-year mortgage was paid off in about 9½ years – what a great feeling!!

BONUS TIP:

If you are living at home (rent free) and saving to buy a condo, townhouse or detached home, start putting what your mortgage payment would be aside in a special savings account.  This helps you get used to having that money allocated for your future mortgage.

In addition, the money that you set aside in savings will become your down payment and help you get a solid foothold on the property ownership ladder.

Next time, I’ll be sharing strategies to buy the right car for you, without having to finance it.

Until then, if connecting with me feels right for you, please call me at 705.881.1846 or 1.844.881.1846 or email me at Patti@AwesomeWealthyWoman.com and I would be delighted to speak with you personally.

“It’s time to start thinking differently about money and debt and start the healing process – and the process toward wealth and freedom.” ~ Robert Kiyosaki