There's no denying that the house-buying process can be stressful. Now that you've settled into your own home, are you dreaming of a life without the stress of mortgage payments? Let's explore some effective strategies and tips to pay off your mortgage early.
How to Pay Off Your Mortgage Early
Bi-Weekly Payments
Additional Principal Payments
One Extra Payment Per Year
Refinance Your Mortgage
Bi-Weekly Payments
Switching from monthly to bi-weekly payments is one way to make a significant difference in your finances over time. By splitting your payment in half and paying every two weeks, you make 13 payments in 12 months. This simple change can significantly impact your financial situation in the long run. If you pay an additional month each year, you will pay that much extra toward the principal. As a result, you can reduce the life of your loan by six to eight years. Additionally, you will build equity in your home faster and reduce the total amount of interest paid, too.
Additional Principal Payments
Making more principal payments whenever possible helps you pay off your mortgage loan more quickly.
It's important to note that making additional principal payments does not lower your monthly payment. However, in the long run, it saves you funds by reducing the length of your loan term, slashing the total amount of interest you'll pay.
Creating a budget and prioritizing your mortgage payments can help you portion more funds toward paying off your loan.
Make One Extra Payment per Year
Additionally, consider making one extra payment per year toward your principal. Though it might not sound like much, one additional annual payment can significantly reduce your mortgage length.
For example, you can use a work bonus or an unexpected gift as funds toward another payment. If you get a tax refund, consider putting the money against your mortgage to pay it off earlier.
Refinance Your Mortgage
Refinancing your mortgage involves replacing your current loan with a new rate, term, or balance. Borrowers refinance to take advantage of a shorter loan term and save on interest.
For instance, if you initially took out a 30-year loan but can now afford higher payments, you may opt for a 15-year mortgage with a better interest rate. This strategic move reduces the total amount of interest you'll pay, saving money on the life of your loan.
Pay Off Your Mortgage Early with These Helpful Tips
Using the following strategies and tips, you can gain control of your mortgage and pay it off sooner than expected. This gives you more time and funds to do what you love with your loved ones.
If you are a homeowner in a position to make some changes to your mortgage, contact us to adjust your loan term or discuss your refinancing options. We can also help first-time home buyers and provide assistance if you don't qualify for a traditional loan!
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