If you’re worked your way out of consumer debt and all you have left is your mortgage, you may want to pay it off early. Who doesn’t?
Most people think it’s impossible, especially when they’re looking at hundreds of thousands of dollars in debt.
It’s not as hard as you think.
Do any of these 5 things and you too could pay your mortgage off faster.
- Make extra payments
Most people think to make extra payments, it has to be a huge amount – it doesn’t. Even an extra $100 a month knocks a few years off your mortgage term. Take a $150,000 mortgage at 4% on a 30-year term for example. You’d knock 2 years and about $8,000 of interest off your loan.
Whether you make consistent extra payments or just once in a while, every extra dollar you pay toward the mortgage decreases the total interest you pay on the loan.
- Make bi-weekly payments
If your mortgage company allows it, make bi-weekly payments. This doesn’t require any extra payments from you because you take your normal mortgage payment and divide it in half. Pay one half every two weeks so that you make a full mortgage payment by its due date.
Doing this every month is the equivalent of making 13 annual payments (one extra payment). This works because there are 52 weeks in a year, if you pay bi-weekly, you pay 26 bi-weekly payments or 13 full payments.
- Put windfalls toward your mortgage
If you earn a bonus at work, get a tax refund, or have an inheritance, put it toward your mortgage. Whether you apply the entire payment or just home of it, you knock down your principal balance, which decreases the interest you owe.
Make extra payments in addition to the other methods or on its own. Either way, you knock down the amount of interest you pay.
- Make one extra mortgage payment each year
If you don’t want to budget an extra payment each month, consider making one extra payment each year. If you make the payment at the start of the year, you’ll knock off more interest, potentially lowering the total amount you pay over the loan’s term.
- Recast your mortgage
If you have a large sum of money you can pay toward your mortgage, consider asking your lender to recast your mortgage.
Recasting means the lender re-amortizes your loan at the lower loan amount, keeping the term and interest rate the same. But to pay your loan off faster, keep paying the same amount (the old mortgage payment). You’ll essentially pay the principal down faster and own the home faster.
It doesn’t take much to pay your mortgage off faster. With a little consistency and dedication, you can have your mortgage paid off in less than 30 years, enabling you to have financial freedom and the ability to save for other goals, such as retirement, real estate investing, or any other goals you have.
