If you have a home mortgage, you may feel like you will forever be in debt. You may be wondering how to pay off your mortgage early. Luckily, there are several efficient ways to reduce the time it takes to pay off your home. You can be one of the many debt-free homeowners and make your final mortgage payment sooner rather than later with these tips on how to pay off your mortgage early.
Can I Pay Off My Mortgage Fast?
Yes, you can. The first thing you want to do is check with your mortgage company. Some only accept extra payments at certain times or might charge prepayment penalties. Make sure that you put a note with your additional amount that you want it applied to the principal balance.
Biweekly Mortgage Payments
You can make biweekly payments. Instead of making a monthly mortgage payment, divide the amount in half and send it every two weeks (biweekly).
The reason for making biweekly mortgage payments is straightforward. Every two weeks, you pay half of your mortgage payment, resulting in 26 half-payments. These half-payments equal 13 monthly payments every year. That extra payment can deduct eight years off a 30-year mortgage, according to your loan’s interest rate.
How to Create a Biweekly Mortgage Payment
Take the interest and principal portion of your monthly statement and divide that number by two. For instance, if the interest and principal are $1,600, your biweekly mortgage payment is $800.
Remember to include the insurance and tax portion of your payment every month. In the $1,600 payment example, the $800 biweekly payment only covers interest and principal. You’ll need to pay the insurance and tax part of your payment as well.
First, you will want to find out if your mortgage company accepts biweekly mortgage payments. Some businesses will take biweekly payments. Some don’t accept partial payments. Regardless, never pay any money to start a biweekly mortgage plan.
How to Pay Off Your Mortgage Early
Budget for an Extra Payment
If you don’t feel like dealing with biweekly payments, you can achieve similar savings by making an extra payment once a year. A work bonus or tax refund can give you the necessary money to use this tactic.
Put the whole amount on the loan principal, and you can reduce your repayment term by approximately seven years if you make extra yearly payments.
Send Extra Money to the Principal
If sending an extra payment every year isn’t in your budget, try to submit an additional amount every month. You can round up your usual payment to the closest hundred-dollar amount or include $100 with your regular payment amount. It’s a pain-free way to reduce your mortgage. Remember to let your mortgage company know you want to add the extra money to your principal.
Refinance Your Mortgage
Also, you can apply for a new loan to refinance your mortgage. A new loan can help get rid of debt in several ways.
Refinancing can decrease the interest rate, resulting in considerable savings. Also, homeowners can refinance for a shorter term to get out of debt faster. For example, instead of refinancing for a 30-year mortgage, the new loan can be for a 15-year term. Even though your monthly payments will be more within a shorter time, consumers could slash their interest costs in half.
Maximize Your Down Payment
The best way to purchase a house is with 100% down. Paying cash for a home might sound bizarre, but imagine how stress-free you will be without a mortgage payment hanging over your head.
Bear in mind that the more money you put down on the front end, the lower the amount you’ll need to finance. That creates a lower mortgage payment every month, making it simpler to pay off your mortgage quicker.
Don’t Bite Off More Than You Can Chew
Before you search for a real estate agent or hunt for homes, it’s vital to be sure you are financially ready and can truly afford the home you want to purchase.
Give Us a Call
If you want more information on how to pay off your mortgage early, call us and speak with one of our mortgage lenders whose advice will save you money and time.