Want to pay your mortgage off faster? There are some simple strategies to help you along the way. The first one is easy and becomes passive with just a little bit of planning. Whether it’s based on your yearly bonus or just a trick of the calendar, putting some thought into how and when you pay could be hugely beneficial down the line!
Free Ways To Shorten Your Mortgage
Make one extra payment a year.
This works especially well if you get an annual bonus or always receive a sizable income tax refund. Just add the money to your next monthly payment.
Once again, you’re chopping away at that principal ahead of schedule.
Pay half of your regular monthly payment every two weeks.
Although a few lenders allow customers to switch to biweekly payments at no charge, most won’t do that, nor will they accept partial payments.
But you can have the money automatically transferred from your checking account to a savings account every two weeks and then transferred to your lender at the end of every month. Ask your bank or credit union for help setting up online transactions, if necessary.
By the end of the year, you’ll have made 26 half payments, which adds up to 13 full payments — or, again, one full extra payment.
Caution: Paying down the principal on your home loan more quickly will never reduce the minimum monthly payment or allow you to skip a payment.
It simply shortens the length of the loan and reduces the total amount of interest you have to pay.
How much could you save?
A $200,000 30-year home loan with an interest rate of 5% would cost $186,512 in interest with the traditional 12 payments a year. Make the equivalent of 13 monthly payments every year, and the loan will be retired in 26 years and you pay only $153,813 in interest — a savings of $32,699.
– via Interest.com
Maybe you want to do more than the two ideas above? There are plenty of ways to approach paying off your mortgage faster than your original rate, and much of it comes down to priorities. Would you rather keep your entertainment budget as it is now, or put some of that money into cutting time off the end of your mortgage?
Want To Take Years Off Your Mortgage?
Many people aim to pay off their mortgages before they retire, but even that may not be the best move in all circumstances.
Having a mortgage does provide a tax break, but it’s not as good a benefit as many people think. According to an analysis of 2012 tax data by The Pew Charitable Trusts, just under 24 percent of tax filers claim the deduction. Many homeowners, even those who itemize, often find they do better on their taxes with the standard deduction.
Refinance your mortgage to a lower rate, and keep making the higher payment. The amount this will save depends on the exact figures, but it should shave years off your mortgage and save you thousands in interest.
Refinance your mortgage to a shorter term. This cuts the amount of interest you pay significantly as well as getting you out of debt sooner.
Contribute funds from another source. Designate money from a bonus, odd jobs or freelance work toward paying of the mortgage. If your income is variable, rather than making regular additional payments toward principal, make one big payment when you can.
Cut expenses and put the savings toward your mortgage. Change to a cheaper cellphone plan, cut the cable cord or otherwise cut living expenses and devote that extra money to extra mortgage payments. Living a frugal lifestyle may be difficult in the moment, but it’s worth the struggle if your ultimate goal is to be debt-free.
– via US News & World Report
Do you want to cut time off the end of your mortgage? Do any of these ideas appeal to you as something you could put into action?