Paying your mortgage loan off may seem like an unattainable task, but if you plan out your finances the right way, it is possible. Paying off your mortgage early means less interest for you and more money to put towards other things like retirement or an emergency fund. If you want to pay off your mortgage early try out one (one or all) of the ways below.
1. Refinance your long-term loan to a shorter-term loan
Often you can take a 30-year loan and have it refinanced to be a 10 or 15- year loan. While your payments will be bigger, you will be able to pay off the loan over a shorter timeline. Additionally, short-term loans tend to have lower interest rates.
2. Pay a little more every month
Paying a little extra can go a long way. When you send in your monthly payment, ask your mortgage lender if you can give an extra payment. If you can, mark it as “principal only”. By doing so you will pay off just the principal rather than both the principal and the interest. Paying down the principal will not only allow you save on interest put you will get a few years ahead of schedule.
3. Pay bi-weekly
Rather than making one single payment a month, try paying twice a month. If you normal payment is $1,200 a month, pay $600 every two weeks. Switching to a bi-weekly paying schedule will have the same effect on your budget, but help you pay your mortgage off faster. By paying bi-weekly, you end up paying 13 payments by the end of the year rather than the 12 you would be paying once a month. You will be paying an entire full-sized payment every year without having to find extra money in your budget.
4. Utilize extra money
While we don’t always have extra money laying around, there are often opportunities outside of our budget. You can get extra cash from a bonus at work, a tax refund, an inheritance, a raise, or profits from your side hustle.
For example, say your monthly salary is $5,000 and you received a 3% raise at work. Now that you are making $5,150 you can put that extra $150 towards your mortgage. The best part about this is that you aren’t used to having the extra cash, so you are less likely to miss it.
Do you really need to pay off your mortgage early?
Although paying off your mortgage early has its benefits, you don’t have if that’s not where your priority is. If you interest on your loan is low and you would prefer to put your extra money into your retirement, go ahead and do it! If you have other financial needs, like paying off credit card debt, make that a priority before working putting that extra money towards your house.