How to Pay Off Mortgage Fast – 5 Simple Ways to Pay Off Your Mortgage Fast
If you want to know how to pay off a mortgage fast, you’ve come to the right place. Read on for some simple methods. Among them, splitting monthly payments in half, making biweekly payments, rounding your minimum payment each year, and making extra payments. All of these methods can help you pay off your mortgage fast. Once you’ve followed these steps, you’ll soon be on your way to a debt-free life.
Split monthly mortgage payments in half
Rather than making one single monthly payment to your lender, try to divide it into two equal portions. Doing so can save you thousands of dollars on interest on your mortgage. Also, you won’t have to worry about damaging your credit rating – lenders report on-time and late payments on a monthly basis. Splitting monthly mortgage payments in half will not affect your credit. But if you’re worried about the extra expense, you can always pay for it through a third party service.
You can pay off your mortgage faster by splitting your monthly payments into two equal parts. Most mortgage loans issued after Jan. 10, 2014 do not have prepayment penalties. However, make sure that you’re aware of the potential penalties if you decide to prepay your mortgage early. Some mortgages charge a prepayment penalty, which can be anywhere from two percent to four percent of your balance. Other lenders will use the extra money for pre-paying interest.
Make biweekly payments
You may want to make biweekly payments to your mortgage to pay it off faster. However, making this commitment may affect your overall financial plan. Making biweekly payments means taking money away from other debts and other financial obligations. Therefore, you should only consider making biweekly payments after carefully considering your budget and goals. For example, if you make two mortgage payments every week, you will save around $500 every year.
In addition to saving money on interest, making biweekly mortgage payments will also allow you to pay off the balance of your mortgage faster. In some cases, you can even shorten your loan term by a couple of years. This strategy is particularly beneficial if you make extra payments each month or are able to take out a shorter, lower-rate mortgage loan. While making biweekly mortgage payments can be challenging, it can result in savings in the thousands of dollars and several years of debt free living.
Round your minimum payment each year
To save money on your mortgage payment, round it up to the nearest full payment each year. Making an extra payment every month, for example, will save you around $150 each month. This money should be used to pay down the principal balance on your mortgage. If you find it hard to keep up with your monthly payments, consider biweekly mortgage payments, which would work out to 26 half payments and thirteen full payments each year.
While it may seem like a hassle, rounding up your minimum payment each year is a very effective way to reduce your monthly payments and pay off your mortgage faster. Compared to making minimum payments every month, extra payments can reduce the total amount of interest you owe and cut months from your mortgage term. However, you must consider the interest rate on your loan. Rounding up your payments each year will save you approximately $24,000 per year.
Make extra payments each year
Making extra payments every year to your mortgage can be a good way to pay it off quicker. These extra payments could be as small as a $100 payment each month, or a lump sum of $1,000 paid at once. This will add up to extra money in the long run, saving you a considerable amount of interest over the term of your loan. Alternatively, you can consider downsizing your home and cutting out the extras.
To make extra payments each year to your mortgage, you can either schedule them to fall on the same day or every other month. Alternatively, you can schedule the extra payments to occur during tax time or when you receive a large bonus at work. While making extra payments every year may sound like a good idea, you should consider your long-term financial goals, as well as the needs of your family in the future. The extra payments could go towards college tuition, a vacation, a new car, home repairs, or other expenses.
Reduce personal spending to pay down more of the principal
It might seem like an obvious choice to pay off your mortgage early, but it may not be the best option. For example, if you have an original loan of $200,000, paying off your mortgage early could save you $8300 in interest over the course of the loan, allowing you to pay off your mortgage in 2.5 years instead of five. But what if you have other bills to pay? How will you make up for the lost income?
One way to reduce your monthly expenses and pay down more of the principle is to cut down on your personal spending. For example, if you cut back on eating out or drinking coffee, you could save $100 per month, which would equal 13 payments per year. If you can’t afford a part-time job, try taking on a second one. If you cannot afford to pay the additional money, consider working a second job, giving up your coffee habit, or making other unique plans to cut back on your expenses.
Build equity faster
Increasing your home equity is an excellent way to reduce your monthly payments and eventually pay off your mortgage. It’s a process that will take time, but will pay off in the long run as your home appreciates in value. You can use this equity to fund home improvements, pay off higher-interest debt, and even take out a home equity loan. However, paying your mortgage early can create an opportunity cost.
Building equity in your home is a great way to free up money for other savings goals, such as retirement and college. But you’ll want to carefully consider the benefits and drawbacks of prepaying your mortgage. Interest rates are low right now, and you can earn more money from investments. Don’t forget the tax advantages of owning a home. If you’re unable to pay off your mortgage fast, you can still enjoy the many other benefits of home ownership.