There are a ton of benefits to paying off your mortgage early — eliminating a huge monthly bill, saving loads on interest, more money for retirement, and more available equity in your home. Not to mention the incredible peace of mind that comes with knowing your debt is significantly reduced, and your home is really yours.
We’ve outlined five great ways to help pay down your mortgage fast and get on with the business of living your life!
1: Make an Extra Payment Every Year
One of the most popular ways of paying off your mortgage early is to make an extra payment at the end of the year. An easy way to save up for an additional payment is to set aside a certain amount of money every month and then make a 13th mortgage payment at the end of the year.
It may not seem like much, but it does work. If you have a $200,000 mortgage with a 4.5% interest rate, you could look at shaving three years off your loan and saved yourself almost $20,000!
If money is tight and socking away extra cash is tough, just make an additional payment whenever you come into extra cash.
2: Make Bi-Weekly Payments
Bi-weekly payments are a painless way to pay off your mortgage faster, and you’ll barely even know you’re doing it. Just split your mortgage payments in half and make your payment every two weeks.
If your mortgage payments are $1200 a month, you would instead make a $600 every two-week payment. At the end of the year, you will have made two extra payments on your mortgage. Similar to our example above, you could save thousands of dollars in interest and shave a few years off the life of your loan.
3: Refinance For a Better Interest Rate or Shorter Term Loan
At the time you got your home loan, you may not have gotten the best interest or terms possible. Pay close attention to interest rates and consider refinancing your mortgage for better terms when the time is right.
4: Put All Your Extra Money Towards Your Home Mortgage
This can take some discipline, but it can make a difference in paying off your mortgage fast and saving you lots of money down the road. Here are some places you may see extra money from that you can direct all towards your mortgage:
- Cash gifts
- Tax returns
- Second job
You may also want to consider places where you can trim the fat out of your budget:
- Unused gym memberships
- Too many lattes
- Dining out
- Expensive vacations
- Excessive cable bills
5: Lump-Sum Payments
This option is not easy for most people, but if you can make even just one lump-sum payment, you will be on the fast track to paying off your mortgage early. Most mortgages allow you to prepay up to 20% of the principal every year without penalty. So if you come into a chunk of change, this would set you on the path to paying off that loan early.
Paying off your mortgage early may not be as hard as you think. And there are plenty of great reasons to do it. If you have decided to pay off your mortgage early, just pick a method and stick to it, you’ll start to see the benefits in no time. And remember, every penny counts!