As with any loan or line of credit, there are benefits to getting your mortgage paid down. You’ll pay less in interest, potentially saving thousands over the repayment period. Moreover, you’ll own your home outright that much quicker.
Let’s explore four money-smart strategies that will help you to pay your mortgage off faster.
Start With The Obvious And Increase Your Payments
It won’t come as a surprise that one of the easiest ways to get your mortgage paid off is to increase the amount you put towards your monthly payments. Most lenders will allow you to place any extra funds directly against the outstanding loan amount or “principal.” This is very efficient as it avoids having to commit any additional funds to interest.
One trick that many families use is to round the payment amount up to the nearest hundred-dollar figure. For example, if your mortgage payment is $652.32, you would pay $700 instead. This might be an easy burden on your wallet but still amounts to an extra seven percent of your payment.
Accelerate Your Payment Schedule
Another way to get your mortgage paid off as quickly as possible is to accelerate how frequently you make payments. For example, if you are currently making payments on a monthly basis, you can switch to bi-weekly payments instead. This means that instead of 12 large payments per year, you’re making 26 smaller payments. However, your interest will still compound on a monthly basis which means that over time you’ll end up paying less in interest. Not all mortgage products support this, so it is best to check with your mortgage professional to ensure it is an option open to you.
Dedicate Your Tax Refund To Your Mortgage
If you receive a tax refund or other large sum of money, consider using it to pay your mortgage down further. This is an excellent use for a spare block of cash as it gets you one step closer to owning your home, free and clear.
Refinance Your Mortgage To A Shorter Term
Finally, one last strategy is to look at a shorter term for your mortgage. For example, if you started with a 30-year amortization, you can refinance down to a 15-year loan instead. This will require having access to significantly more money to place against your payment, so be sure to carefully budget for this additional cost.
These are just four of the many ways that you can get your mortgage loan paid off faster. For more information or to inquire about a mortgage for your next home, contact your local real estate professional.