Mortgage Killer Accelerator

Strategy 23 of 107

Re-shop homeowners insurance and send the savings to principal

Depends on people or program rulesFrom a lower cost of the same debt

What it is

Get at least three quotes for the same coverage, deductible and limits.

Steps

  1. Get at least three quotes for the same coverage, deductible and limits.
  2. Ask about discounts for bundling, security systems, a newer roof or claim-free years.
  3. If escrow pays the premium, tell the servicer about the new policy; the lower escrow amount goes to principal while the total stays the same.

Repeat: Every renewal.

Measure: Yearly premium saved, divided by 12.

Try it in the calculator Enter its amount in "Monthly non-income amount to principal". Add a payoff goal of 5 years to see what is still needed.

Risks

  • Cheaper can mean less coverage; compare the dwelling limit, deductibles and exclusions, not only the price.
  • Never let coverage lapse; the lender can place costly insurance on the loan.

Who it fits

Average household, Married couples, Single, Grandmas and grandpas (62 and over), Newlyweds, Higher earners, No high school diploma, No college degree

Needs

Any homeowner with a mortgage.

How predictable

Depends on people or program rules (tenants, family, IRS records, lenders)

A worked example (hypothetical, not guaranteed)

Picture a hypothetical household (average household). They owe $300,000 at 6.5% with 30 years left. The required payment is $1,896 a month, and that payment, which comes from income, never changes in this example.

They follow the steps: get at least three quotes for the same coverage, deductible and limits.

Suppose it brings $600 a month on principal from this strategy, not from the paycheck. The loan would be paid off in 16 years 3 months instead of 30 years, saving about $196,219 in interest. To finish in five years, they would still need about $3,374 a month more from other strategies. That is why the five-year sequences stack several at once.

The amount above is chosen only to show the arithmetic. It is not an estimate of what this strategy will produce for anyone. Put real numbers from the fact finder into the calculator.

Sequences that use it

  • Cost-cutter stack (no new debt): Every dollar comes from a bill that got smaller. The total you pay each month stays the same, and the difference lands on principal.
  • Veteran stack: A lower rate at the same payment, then a lower escrow: many states give veterans a property tax exemption to file.

Sources and more information

Where to get help

Related strategies

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