How to pay off your mortgage earlier

If you listen to any financial guru on talk radio or see them on financial shows on cable news, almost all will generally advise homeowners to pay off their mortgages early, if possible. How much you save depends on the amount of your mortgage, the length of time you pay and your interest rate.

The advisors put forth many strategies to accomplish the goal of paying off the house. Really, it all boils down to one thing: paying extra money up-front to save you money in the long run.

Refinancing isn’t the only option

Occasionally, lenders will offer refinancing programs in order to drop your interest rate. This means that your monthly payment will be less, of course. However, unless it specifically allows you to keep the length of your mortgage static, most of the time when you refinance, your mortgage will be 30 years. Again. If you can swing it, and if they offer it, look for mortgages that offer fewer years. The 15-year refi has been popular over the last couple of decades.

Pay more however and whenever you can

Most lenders will allow you to pay off your loan early without penalty. Any amount you pay extra on the mortgage payment comes right off the principal, which can greatly reduce the amount of interest you pay in the long run.

Here’s where the financial gurus get in a lather and offer all kinds of advice to accomplish your goal.

Round up your payment

Every month, pay your mortgage up to the next $100. If you can’t afford it month in and month out, round up to the next $50. Any money you pay extra comes off the principal.

Switch to biweekly payments

This requires a little more leeway in your budget. When you make biweekly payments, you are simply taking advantage of the fact that there are 52 weeks in the year and 12 months. When you pay half of your regular mortgage payment every two weeks, you will have made 26 half payments, or 13 full monthly payments, by the end of the year.

Pay extra when you have it

Keep in mind that you can make irregular payments and send any amount when you have it. When you get a tax refund, a bonus or any other type of windfall, apply it to your balance.

Take a look at what you’ll save

If you want to have some fun, go to a mortgage calculator and punch in some different options to see how much you’ll save.

Weird things can affect your credit score

Attaining and maintaining a good credit score is important because you could get a lower interest rate on your mortgage, potentially saving you tens of thousands of dollars over the life of your mortgage. In order to get the highest credit score possible we’ve all heard the typical advice for keeping good credit:

• Pay all of your bills on time


• Don't open a bunch of credit cards at once


• Don't file for bankruptcy unless absolutely necessary


• Keep an eye on your report to make sure everything is accurate

Those are the big things. But there are some little things... really strange things... that can add up when it comes to keeping your credit reports clean.

Getting cable or internet

There are some Internet and cable companies out there that will run a hard inquiry on your credit when you sign up for their service. A hard inquiry occurs almost any time you apply for credit - credit card, car loan or home loan, etc. A hard inquiry negatively impacts your credit score by a little bit. If you have too many hard inquiries at once, it can really ding your credit. The company has to have your permission in order to do this, so it shouldn't come as a surprise.

Using a debit card to rent a car

Most rental agencies require that the deposit be paid with a credit card. Some will agree to accept a debit card if you'll allow them to perform a credit check on you, resulting in... you guessed it... a hard inquiry.

Buying a new motorcycle

If you decide to buy a motorcycle, you should know this: Motorcycle loans are sometimes not reported to the credit bureaus as vehicle loans. Instead they are reported as revolving credit, which makes them look like a big chunk of uncollateralized credit card debt. Thirty percent of your FICO score is based on how much credit card debt you carry.

Unpaid tolls

Many toll booths in the country have switched to “toll by plate” systems where the vehicle has a tag in the windshield or on the license plate and the owner is sent a bill every month for toll road usage. Just like anything else, if you neglect to pay the bill on time, it’s reported.

Library fines

Although libraries don’t report directly to credit reporting agencies, many of them turn over unpaid balances to collection agencies, which do. Don’t let $4.00 in late fees ding your credit score.

Storage fees

There are a number of shows on TV depicting auctions of abandoned storage units. In addition to losing all of the stuff they had in those lockers, the delinquent owners have another thing in common: they all have a negative line on their credit report because the storage facility will turn over any remaining balance to a collection agency.

Financing furniture

Taking advantage of a 0% financing promotion at your local furniture store looks like a good opportunity to take advantage of free money. However, your credit could suffer because you’re adding a high balance loan to your credit report and could increase your credit utilization rate since the furniture loan is essentially maxed out.

Parking tickets

It doesn’t seem like a big deal, does it? An increasing number of cities are turning over unpaid parking tickets over to private collections agencies.

A collection action by any business can lower your credit score by up to 100 points or more when it shows up on your credit report. It can remain on your credit report for up to seven years, affecting your credit score for years to come.

Tax breaks expire for homeowners

If you keep a sharp eye out, you'll notice that you'll be paying more taxes soon - not this year, but next - if members of Congress don't act in 2014 to prevent it.

Which means you'll be paying more in taxes next year.

The good news for members of Congress is that they can say they didn't "raise" taxes; they only allowed several tax deductions that have been around for years to expire at midnight on December 31.

Private mortgage insurance premium deduction

If you put less than 20 percent down, chances are good that you're being charged PMI. It's used to protect the lender in case of default. It is usually a small percentage of the monthly payment, so most homeowners don't give it much thought. Over the course of 30 years, that small percentage can add up to thousands of dollars. Depending on your tax bracket, deducting it on your federal tax return can trim your cost by 20-35 percent.

Loan forgiveness

When a homeowner gets under water - owes more than the home is worth - they often use a tactic known as a short sale. The lender accepts what the home sells for in exchange for paid-in-full status. The difference between what was owed and what was made is considered taxable income. However, that tax had been waived for years. This could potentially cost a homeowner who does a short sale thousands of dollars at tax time.

Energy efficient tax credits

For the last few years, homeowners received credits for home improvements that increased the energy efficiency of their home. Those projects could include installing better doors and windows, insulation, furnaces, heat pumps, water heaters and central air conditioning. The credit for those will expire; however, some of the credits for installing solar water heaters, wind turbines, geothermal heat systems and other things will remain.

These three tax breaks will remain in effect for your 2013 return. There is always a chance that Congress will renew some or all of them, but it doesn't seem likely. Make sure to talk to your tax preparer.

Tips for moving in winter

For many people moving during the winter is - if you'll excuse the pun - a cold reality. It seems that more companies transfer personnel during the first two months of the year.

This means that a lot of moving takes place during the winter months. The ice, snow, slippery roads and colder temperatures make moving more of a challenge than do it during the warm spring months.

These tips will help you stay safe during your winter moving day, whether you do it yourself of or hire a professional mover.

1. To avoid slipping hazards shovel driveways and walkways before your truck arrives. Put down ice melt to all walkways between your house and the moving vehicle. Don't forget the back entrance!


2. Dress in layers to stay warm. As the day heats up and you start to work up a sweat, you can always remove a layer.


3. Constantly walking back and forth from a warm house to the cold outside is hard on your body. Leave the heat and electricity on in your home until you are completely moved out but leave the door open to balance the temperatures.


4. Cover entrance ways and floors with old sheets or tarps to avoid tracking mud and snow in.


5. Keep towels by the doors to wipe snow from dolly wheels as you come in and out.


6. Make sure you have enough extra moving pads to protect your belongings from the elements. Also make sure moving pads remain dry at all times.


7. Last things to load onto the truck are shovel and ice melt so you can clear the loading area at your new home.


8. With a high center of gravity and shifting weight in the back, driving a moving truck is completely different from driving any other vehicle. Stopping, especially on snow and ice, presents a challenge even for experienced drivers.


9. Keep the moving ramp clean and dry while loading and unloading.


10. If you are transporting any live plants, they should go in your vehicle or in the cab of your rented moving truck. They could freeze if you move them in the cargo hold of the truck.

Number of home buyers paying with cash increasing

One of the real estate industry trends of 2013 was fairly easy to spot. Cash buyers accounted for one-third of all home sales in the past 12 months. This is about where it has been for the last three years.

Surprisingly, cash home sales took a jump in November, according to RealtyTrac. Cash sales accounted for 42 percent of all homes purchased in November, which is the highest level since RealtyTrac began tracking it. The percentage of cash sales in October was higher than average at 38.4.

Who pays cash?

There are certain segments of the population that have the liquid assets available to pay cash for homes.

• flippers


• retirees who are downsizing


• wealthy who are investing or purchasing vacation homes


• investors who expect the market to improve enough for a good return on investment through rentals


• overseas buyers


• people who have trouble getting financed

What it means

While the housing market is slowly heading back to normal, the rising number of cash sales is a sign that recovery is not complete. The pace is simply not sustainable.

The trend upward in cash-only sales began when mortgage rates began to tick up. Buyers with cash are willing to forego the tax advantage of carrying a mortgage to save on interest. Other savings for cash buyers include loan origination fees, appraisals and some closing costs.

Other advantages for cash buyers include avoiding the loan qualification process and the ability to close the deal very quickly.

How your property taxes are paid

Last week, we talked about where your property taxes go. This week, we’ll talk a little about how they are paid, which for most homeowners is a line item on their mortgage statement.

For most borrowers, holding property taxes in escrow is required by the lender. Some lenders who will let you do it still discourage it by charging you more interest. Today, though, most banks won’t even give you the option of not having an escrow account unless you can prove you have a certain amount of funds on hand or you have a certain amount of equity in your home, usually 20 percent.

No matter what state you live in, if you have a mortgage, chances are pretty good that your lender pays your property taxes through an escrow account. In fact, many people never even become aware of the monthly allocation until their mortgages are paid in full and they are directly responsible for paying the property taxes themselves.

Even if your bank pays your personal property taxes, you should receive a copy of the bill at least once each year, whether you pay your property taxes directly to the tax authorities or through your mortgage lender.

Always keep the latest copy of your tax bill where you have easy access to it. You never know when you might need it to prove residency. For example, some school districts require it when you enroll the kids in school, particularly if you're enrolling them in a new school. And you'll ALWAYS need it to do your income taxes, too!

The obvious reason to use an escrow account is, quite honestly, convenience. Simply adding it to your mortgage payment, not worrying about the paperwork, ensuring that it is paid on time... it honestly negates any cons related to escrow.

Some people who own their home continue to use an escrow account because they can set it on autopilot and don’t have to worry about making the payments when they are due.

What do property taxes pay for?

The end of the year brings holiday celebrations, New Year’s resolutions, football playoffs and bowl games, and for many, the dreaded property tax bill.

If you're like most people, you look at your property tax statement and automatically think "That's too high." But if you take a closer look, you'll see that your property taxes are spent in a lot of different areas, which is why it’s so hard to get lower taxes overall.

Depending upon where you live, your property taxes fund any number of state and local government functions. Here are the most common lines you'll see on your property tax.

Schools

By far, public schools are the largest single line item in nearly any property tax bill. A commitment to providing the best possible education often leads to higher local property values. In addition, the houses in neighborhoods with higher rated schools generally have higher prices. Although public school systems get funding from a variety of sources, including federal government, state government, fund raising efforts, the largest source is generally from property taxes. This is also why any tax reduction attempts meet strong resistance from both school employees and parents of school-aged children.

Public roads and parks

Although a lot of money from gasoline goes to roads, those are mostly financed by state and federal government. City and neighborhood street repair comes from property tax. Public park maintenance is funded as well.

Utilities

Depending upon the area in which you live, your property tax bill may also include certain utility costs that are provided by the county or municipality, which could include sewer, water and maybe garbage collection.

Government administration costs

This is a relatively small part of the local budget, but it covers salaries and benefits for municipal administrative staff and the buildings that house them.

Public safety

Many people mistakenly think that traffic citations fund police budgets, but most of their operating budget is provided through property taxes. Firefighters are also included in this category. This includes not only salary and benefits for policemen and firemen, but support personnel as well the acquisition of buildings and police cars.

Libraries

Although they’re not usually very large parts of your tax bill, they are considered highly desirable in most communities and largely beyond political haggling. When a tax increase is on the ballot, it rarely fails.

City and county allocations

Both rely primarily on real estate tax revenues to support their operations, so taxes are usually collected and paid to both. In many cities and counties, one government agency may collect the tax under a single bill, then apportion the funds, so you may pay your taxes to your municipality who then forwards the required portion to your county.