Tips for Paying Off Your Mortgage in Less Time
Every dollar you add to your regular mortgage payment puts a larger dent in your principal balance. You can still make a difference with even small changes. Adding just 1 extra payment each year knocks years off your mortgage.
Here are ways you can save thousands and reduce years off your mortgage without big changes to your budget:
Biweekly vs. monthly payments
- This will have a similar impact on your budget, but will result in 13 full-sized payments per year instead of 12 because there are 52 weeks per year.
- You will be making half-sized payments every 2 weeks. If your mortgage is $1400 per month, pay $700 every other week.
- If you have a $200,000, 30-year mortgage at 5% interest rate, paying biweekly will save you over $34,000 in interest and allow you to pay your mortgage off 5 years earlier!
Additional principal payments
- Send additional funds marked for as principal only vs. principal and interest as your budget allows.
- Depending on the additional amounts you apply, it will have the same effect as biweekly payments in shaving off time and interest cost from your loan.
- If your budget is tight, consider rounding up to have effect on your original loan. If your loan payment is $1316, try rounding to $1400 or $1450.
Refinance your loan
- If the interest rate has changed even 1% less than your current rate, consider a refinance. Some homeowners have refinanced just 1 year after purchasing due to mortgage rate changes with a positive impact.
- Refinancing from a 30-year to a 15-year loan – shorter loans often mean lower interest rates and that means more savings!
f you have a low interest rate on your mortgage, consider talking to a financial advisor. Investing your additional funds elsewhere may lead to a larger financial payoff than paying off your mortgage faster.
Visit our list of recommended local experts if you are looking for lenders or financial advisors to contact: AlvaradoList.com