For most people, buying a home means getting a mortgage, and the most commonly used mortgage is a 30 year fixed mortgage. Buying a home is a big investment, but the thought of paying a mortgage for 30 years can be dejecting. There is good news though, with some careful planning and perseverance you can pay off your mortgage much earlier than expected. Follow the tips below to pay off your mortgage earlier.
1- Refinance
Refinancing your mortgage to a lower interest rate can save you thousands over the life of a loan. After refinancing your payment will go down each month. However, if you still make the same payment you have been each month the extra amount will go toward the principal balance. You can also refinance to a shorter term, it may make your payment increase slightly, but will save you lots of time and money overall. However, only refinance to a shorter term if you are getting a lower interest rate. You don’t want to pay closing costs for refinancing only to get a shorter term.
2- Make Bi-Weekly Payments
Bi-Weekly payments are a method of paying on your mortgage once every two weeks. This allows the homeowner to make 26 half payments each year, which equate to one extra full payment per year. This is something that your mortgage company can set up for you, but if they charge a fee to set it up do it yourself. All you’ll need to do is take you monthly mortgage payment and divide it by two, then pay that amount every other week. This method can shave off 6-7 years of your mortgage.
3- Pay extra each month
Another tactic to paying off your mortgage sooner is to pay extra each month. Send in an additional $100 or whatever you can afford each month to be applied to your principal balance. This will not only reduce the length of your mortgage, but the amount of interest you pay each month since the interest will be charged on a lower principal balance.
4- Throw extra cash toward your principal balance
Whenever you come across a financial windfall of some sort, use all or some of that money to pay down your principal balance. If you receive a bonus at work, a refund from your escrow account, or a larger than expected tax refund, pay it toward your mortgage. Since this is “found” money anyhow, you won’t feel the impact of letting go of it and you’ll reap the benefit of paying off your mortgage sooner.
5 – Rent your home while you are traveling and throw it toward your mortgage
This idea is a bit unconventional, but could help you pay down your mortgage quicker. There are websites like AirBNB that can help you to list your home for rent. If you live in a popular travel destination, you could rent out your home while you are away. Renting your home for one week could easily pay an entire mortgage payment. Obviously, there is more risk involved. However, with careful preparation and screening, this can be beneficial and help you to pay your mortgage off sooner.
6- Negotiate lower monthly bills
Look over all of the bills you pay monthly. Most likely you could trim off excess spending with a lot of your bills. Renegotiate car and homeowner’s insurance, lower your cable and cell phone plans. A savings of $20- $50 on each bill can amount to several hundred dollars monthly that you can apply toward your mortgage.
For expert guidance and opinion contact Aceland Mortgage.