If you’re a homeowner, you know that paying off your mortgage can take decades. While it’s a significant financial commitment, it doesn’t have to be a burden for the full term of the loan. Paying off your mortgage faster can save you money on interest and give you the freedom to focus on other financial goals. In this article, we’ll discuss five tips to pay off your mortgage faster, so you can own your home outright sooner.
Tip #1 Make Extra Payments
Making extra payments is one of the simplest and most effective ways to pay off your mortgage faster. The more money you put towards your principal, the faster you’ll pay off your loan. You can do this by making extra payments on top of your regular mortgage payments. For example, if you have a 30-year mortgage, you could make an extra payment each year, effectively reducing your loan term by several years.
There are many ways to make extra payments. You can use any bonuses or tax refunds to pay down your principal, or you can set up automatic payments to make an extra payment each month. However, it’s important to check with your lender to see if there are any prepayment penalties before you make extra payments.
Tip #2 Refinance for a Shorter Term
Refinancing for a shorter term is another effective way to pay off your mortgage faster. If you currently have a 30-year mortgage, refinancing to a 15-year mortgage could cut your loan term in half. While your monthly payments will be higher, you’ll save money on interest over the life of the loan. You’ll also build equity in your home faster, which can be beneficial if you plan to sell in the future.
Before you refinance, compare rates and fees and consider how long you plan to stay in your home. If you plan to move in the next few years, refinancing may not be the best option.
Tip #3 Make Biweekly Payments
Making biweekly payments can also help you pay off your mortgage faster. Instead of making one monthly payment, you make half of your mortgage payment every two weeks. This results in 26 half-payments per year, which is equivalent to 13 full payments.
By making biweekly payments, you’ll reduce your loan term by several years, which can save you money on interest. However, it’s important to set up biweekly payments with your lender to ensure they’re applied correctly. You should also check if there are any fees associated with making biweekly payments.
Tip #4 Round Up your Payments
Another way to pay off your mortgage faster is to round up your payments. For example, if your monthly payment is $1,350, you could round it up to $1,400. By doing this, you’ll pay an extra $600 per year, which can reduce your loan term by several years.
You can automate your payments to round up your payment amount, or you can manually add the extra amount each month. However, be careful not to overdraw your account or incur any overdraft fees.
Tip #5 Consider a Lump-Sum Payment
If you receive a windfall, such as an inheritance or bonus, consider making a lump-sum payment towards your mortgage. By applying a lump-sum payment towards your principal, you’ll reduce your loan balance and save money on interest. You could also consider using savings to make a lump-sum payment.
Before making a lump-sum payment, check with your lender to ensure there are no prepayment penalties. You should also consider how the payment will impact your overall financial goals.
Is Refinancing Right for You?
If you’re considering refinancing your home to pay off your mortgage quicker, we are here to help. Our team of experienced loan officers can guide you through the refinancing process and help you find the right mortgage solution for your unique financial situation.
By refinancing your mortgage with us, you’ll have access to competitive rates and personalized service. We’ll work with you to understand your financial goals and help you find the right mortgage term and rate to help you pay off your mortgage faster.
So if you’re ready to take the next step towards paying off your mortgage quicker, contact us today. Our team is dedicated to helping you achieve your financial goals and own your home outright sooner.