You need to check with your lender and know about the current mortgage servicer. It is often a case that your loan is originated at one company and the servicing is being provided at another company. You can contact your loan servicer by phone and obtain a payoff quote or statement.
You may need to send a check or letter to a mailing address of the payoff department or wire the fund using an online payment gateway. If you are not able to pay off in one lump sum, you can contact the equity accelerator department of your mortgage servicer to arrange for bi-weekly payments.
|Financial Institutions||Payoff Department||Equity Accelerator Department|
|Fifth third Bank||800-972-3030|
|Sovereign bank (now Santander Bank)||800-232-5200|
|Bank of America||1-800-669-6607|
|Gmac (Now serviced by Ocwen)||800-746-2936|
Is my payoff amount is the same as the principal balance?
No, your payoff amount can be different from the principal balance as the interest is generally applied in arrears. Call the phone number of your servicer to know about the correct payoff amount.
Why would you want to pay off your mortgage early?
There are two obvious reasons why you would like to contact your lender’s payoff department and know about your payoff amount.
- Save Money: The longer your amortization period, the more you pay on interest. Do you know you pay more than double the price of the home before you actually own it? Pay off your debt sooner and you could possibly save thousands of dollars in interest. However, you must consider the prepayment penalty, if any, while calculating and arriving at a correct decision. A payoff calculator can help you do so.
- Have Peace of Mind: A debt is always a burden no matter how comfortable you are with the monthly payments. Unpredictable future and the prospect of unemployment can cause you to miss a few months and bring you on the verge of foreclosure. You won’t have peace of mind until you make the last payment and claim full ownership of your home.
Besides, the following arguments are often used against early payoff, but there are counter arguments as well.
- Investment: With the mortgage rates taking a southward turn, it often seems a prudent decision not to pay off and keep mortgage to the full term. Experts advise to invest the extra money in various financial instruments with higher returns. However, the market is as unpredictable as it used to be when the mortgage rates were high. Your earning can be higher or lower depending on how the market performs. For conservative investors, however, paying off mortgages and saving on the interest will be a much safer option.
- Tax Saving: True, your mortgage payment can help you save on government taxes. But, this is only half true. Paying on mortgage interest can only be helpful when you are in the highest income tax bracket. A person relying on a mortgage loan to buy a home is likely not that much rich. For an average homeowner, tax saving is nothing but a farce.
How can you pay off mortgage faster?
There can be a number of ways to pay off mortgage quickly. The following are some of these.
- Make Extra Payments: Make an extra payment every few months and you will be able to knock off a few years from your amortization schedule. Ideally, you should inculcate a habit for saving on general expenditure and save enough to make an extra payment every four or six months.
- Round up Payments: If you can’t save, you can try to pay just a few dollars more every month. The best way to do so is to round up your payments. For example, you can pay $560 instead of $556, reducing your principal balance by a meager $4.
- Refinance: A great way to pay off without spending more out of the pocket is refinancing. You should look for a refinance loan with a shorter term and possibly a lower rate. The monthly payment on a 15-year mortgage as compared to a 30-year mortgage is not as high as you might think. Moreover, you may be able to reduce the cost of your mortgage if you can get a lower rate of interest. However, you need to take into account the closing cost or your refinance loan.
- Make Biweekly Payments: A smart way to do pay off faster is to switch to biweekly payments. The advantage with this arrangement will be that you have one extra annual payment. Many mortgage servicers have an equity accelerator department to help borrowers switch to biweekly payments with or without a fee.
- Sell the Home: If you have enough equity in your home, you may be able to sell it and use the proceeds to make one-time payment to pay off the mortgage. Depending upon the market value of your home, you can get money to pay off as well as buy a smaller or cheaper home.