How would you like to be able to pay off your mortgage few years earlier?
Mortgages are one of the very few types of good debt.
They’re huge financial commitments, but in return, you get to become the owner of your own home.
One typical particularity though is, the debt typically expands over a 30 year time frame. That. Is. A lot!
Ideally, you would buy a home with cash as soon as you’re ready to settle down. But which young adult has that kind of money lying around?
Paying off a mortgage faster is possible though.
Some do it simply because they can’t wait to be debt free.
Others make it a goal to pay off their mortgage before retirement.
Regardless of the reason, it’s important to know that you can get rid of mortgage debt faster.
With a bit of effort and financial sacrifice, you could potentially pay off your mortgage much earlier. Or at least erase few years off your debt.
3 uncomplicated ways to pay off mortgage faster
Add more to your principal balance
A great way to shorten the life span of your debt is to simply add more money to your principal balance.
You have your fixed installment you need to cover.
But did you know that, by paying more than the minimum required, that extra money can be applied to your principal balance?
This means you could wipe off a few good years off your debt!
Because the interest of a loan is calculated on the remaining principal balance, the more you add to it, the less you’ll pay in interest in the long run.
You’ll just have to make sure the extra money applies to your principal, and doesn’t go towards your next installment!
You’ll also have to make sure you’re allowed to do this. Some lenders might literally charge penalty fees if you attempt to make any extra payments. be careful!
Adding any amount of extra cash towards your mortgage payments will help.
Any bonuses or raise will do. Windfalls help as well.
Adding even a measly $20 extra a month is better than nothing. A typical $200,000 mortgage, with a 4% interest rate could be paid off 1 year faster. With about $6,000 in interest savings!
Sure you’d have to give up on certain wants or luxuries, like eating out or buying new stuff. But saving tens of thousands on your mortgage might just be worth it.
Opt for biweekly payments
Biweekly payments help a great deal!
One mortgage payment a month meas 12 installments.
But a year has 52 weeks!
By making biweekly payments, you’ll be paying half your monthly amount, every 2 weeks. This translates into 1 additional payment a year!
You’d think it’s no big deal, but looking at the same typical mortgage example from earlier, you’re looking at shaving about 4 years off your loan and saving more than $22,000 in interest!
Making 50 less mortgage payments sounds good, doesn’t it?
Consider refinancing to shorten the term of your mortgage loan!
By shortening your loan’s term, you also pay much less in interest!
Killing 2 birds with 1 stone sounds convenient.
Yes, you’ll have to pay a lot more each month. Well, preferably every 2 weeks. But if you can afford to, you could be debt free in 15 years instead of 30 and save a ton of money in interest fees.
Related article: Home appraisal checklist for refinancing a mortgage
Not everyone finds paying off mortgages faster advantageous though.
In some cases, it might be more convenient to maximize your retirement savings, instead of using the money to pay off your house.
Or, you might find that, investing your extra money in bonds or other securities is 10 times more worth it than what you would save by paying your mortgage earlier.
But even so, should you ever consider getting rid of mortgage debt a few years earlier, now you know doing it isn’t all that complicated.
Have you ever thought about paying off your mortgage faster?
Or if you already did, what financial decisions helped most?
Latest posts by Adriana (see all)
- Hidden Expenses Homeowners Often Forget - March 9, 2020
- Expenses that Your Tax Accountant Can or Can’t Help you Deduct - August 22, 2019
- Personal Finance and Mental Health: When to See a Therapist - August 9, 2019
- Strategies to pay off student loan debt faster - August 22, 2018
- 5 profitable house flipping strategies - January 31, 2018