May the roof above us never fall in
And may we good companions beneath it never fall out.
~Irish Blessing

Bills are not fun. Paying bills is not fun. I can think of about a zillion things that are more fun than paying bills. But there is something extremely satisfying about paying off debt and being in control of our financial futures.

Girlfriend Guru and financial expert MIATA EDOGA shares her knowledge and insight about creating a solid financial plan and paying off your mortgage earlier than you might have planned. What is your best advice for a strong financial future, girlfriend?

You’re wondering why the title of this piece isn’t “Take Out a 15 Year Mortgage,” aren’t you? Why do I sometimes recommend a 30 year mortgage instead of 15? It’s simple: risk. Sadly, we never know when something financially crippling might happen. The main reason people lose their house isn’t because they’re a deadbeat and decide to stop paying their mortgage. It’s actually because they became disabled and could no longer afford the payment. A 30 year loan buys you the flexibility to lower your payment later and possibly save your home.

Here’s a safe path to paying your mortgage early:

1)      When you take out a mortgage, ask about a 30 year loan. In most markets, the interest rate is marginally higher. That’s the price you’re going to pay for safety. The great news is that in this market, a 30 year loan isn’t expensive. As I’m writing, the average rate is 3.64%, but that could fluctuate by the time you read this.

2)      Assuming the rate isn’t much different, ask about the payment difference. You’ll find that a 30 year loan (shocker) is about half the monthly out-of-pocket cost of the 15 year (if you have an escrow account to handle taxes and insurance, the total won’t come to exactly half, because these costs are based on the property value, not the mortgage amount).

3)      Then, ask about the cost to pay the 15 year loan IF the rate were the same as the 30 year loan. This is a key point, because if you only make the 15 year payment, that slight difference in interest rates will be enough to cost you several extra payments at the end of the life of your mortgage.

4)      Ask about automatic payments to the mortgage. Most companies love automatic payments. You know why? The chance that you’ll forget to make your payment is greatly reduced if it automatically comes from your account. Good news: many banks give you a lower interest rate if you agree to use their auto-pay option.

5)      Assuming they accept automatic payments, sign up for automatic payments at the 15 year rate in step 3 above AS you sign for the mortgage. Don’t trust yourself to make bigger payments. Sign up for automatic payments to ensure you attack your debt.

There you have it. If you ever wind up in trouble (and hopefully nothing will happen, but you never know), you now have a safety valve AND you have automatic payments to ensure you take out the amount of the 15 year loan every month.