A few years back I always wanted to know how to pay off my mortgage faster. While most people dream of owning a home, constantly rising property prices have made it difficult for many to fulfil this dream or paying off their house in full.
However, choosing a good mortgage plan can see you acquire your dream home.
Since these loans take many years to pay back, it would be wise to find ways of reducing the term of the loan. Here are simple ways to pay off your mortgage much quicker than the allotted time.
Find The Right Home
Before you apply for financing for the home you wish to buy, it is important to make sure that you are ready for this step. Being mentally and financially ready is a great place to start.
Once you are sure you can afford to pay a mortgage you should work with a real estate agent to identify the right home for you. A professional realtor earns their money working for you to find the right home.
Make Biweekly Payments
Rather than making a single payment every month, half-sized payments every 2 weeks will help you to shorten the period to pay off. With a total of 26 biweekly payments in a year, you will have made an extra monthly payment by the end of every year. However, you should ensure that you can afford to pay more and have the required discipline before going for this arrangement.
Use Your Tax Refund
It is clear that making extra payments is one of the sure ways to quickly pay off your mortgage. This is why you may want to consider using your tax refund to pay down the mortgage. Making a lump-sum payment will significantly reduce the amount you need to offset, effectively helping to pay your mortgage faster.
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Hit The Principal Early
During the early years of paying your loan, it may appear that the principal is not going down. In fact, all your payments may seem to go towards paying interest on the loan.
Since this is one of the results of compound interest you should strive to pay the principal as early as possible. This will help you to pay off your mortgage faster.
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One way to do that is once a month, write a separate check to be applied to the principal only. If your lender applies this payment to accrued interest first, before applying it to the principal make your second payment at the same time as your regular payment with instructions to apply it to your principal only.
Use A Windfall
In case you receive some unexpected money, you should consider using it to pay down the principal on your mortgage. Depending on what your lender has stated in the mortgage document, money obtained through inheritance, investment gain or from winning a lottery can help to significantly reduce the amount you owe the lender.
Rent Out Extra Space
If your home is big enough you could rent out extra space such as bedrooms, parking space, and the garage. Renting out space will allow you to make some extra money which can be added to your regular payments. You can also choose to be frugal in order to set aside more money to pay your mortgage.
Check out Airbnb. This is becoming a very popular service for homeowners to rent out their home when they are gone.
Protect Your Investment
Apart from paying off your mortgage faster you should take the necessary steps to protect your investment. This includes buying homeowners insurance and ensuring regular maintenance of the property.
Sell Your Home
Are you really in the home you want to be in? The fastest way to pay off your mortgage might be to sell your home.
As crazy as that sounds now might be the perfect time to sell and buy something you really want to live in. If not now, when?
You may have built up equity in your home you could use to put down on something else.
Maybe your house is too small. People outgrow their homes for one reason or another including a growing family.
Maybe your house is too big. Empty nesters often find themselves in a home that is way too big for 2 people.
Take advantage of low-interest rates. You may be surprised to find the rate on your current mortgage is too high and you could buy the house you really want for less monthly payment just from a lower rate.
Refinance The Mortgage
This is a common strategy for paying off your mortgage faster. These tips can go a long way to getting your mortgage paid off fast.
1. Shorter-term. While refinancing into a shorter-term loan will result in you making higher payments, it will help you pay the loan a lot faster.
The short timeframe also means that you will enjoy better interest rates. In the end, the amount of money you pay the lender will reduce considerably.
2. Don’t pull equity. A common reason people refinance is to tap into the equity they have built up.
You do not want to do that as it only lengthens the time it will take to pay off your mortgage. When you refinance to get the best rate as you can and leave your equity alone. Set up a home equity line of credit in case you really need it instead.
3. 15-year loan. If you have more then 15 years left on your mortgage refinance it into a 15-year loan so you can pay it off faster.
A 15-year loan will give you a higher monthly payment. However, you will begin to hit the principal faster and pay less interest as your reward.
Final thoughts on how to Pay Off Your Mortgage Faster
These are some popular ways to pay off your mortgage faster. A home is usually the single biggest purchase you will make in your life, so why not own it quicker and be able to enjoy it more. Follow one or more of these tips to make that happen for you in your home.
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