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 fulfill this dream or pay 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 money working for you to find the right home.
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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.
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.
One way to do that is once a month, and 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 a 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 homes 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
Refinance The MortgageThis 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 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 than 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
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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You have given a lot of ideas here to pay off your mortgage faster and i can relate to most of them. I have seen a lot of my friends have done this so i know it works.
You can work it….
Or you might just get lucky.
Do you know someone who owns two homes and who would be willing to sell one of them? I was renting an apartment and the maintenance man for the apartment building owned two homes.
He had been renting the second home out, and he offered me an opportunity to buy his second home for only $20,000, for $500 a month (no interest) until paid in full. It took only a few years to pay off the “mortgage” and the home was mine, free and clear. So it happened for me once, and i know it can happen again.
Paul, thank you for resonating with me that you can pay off your mortgage faster if you worked at it. In your case you did get lucky and you took advantage of this. No, at the moment I do not know anyone who want to sell one of their homes. but if I do, I will let you know.
Wish you great luck with your real estate business, lol. thank you for taking the time and leaving a comment.
Hi David and great tips on paying the mortgage off! I have contemplated this for some time now, not knowing exactly how to go about it or what my options were. Your advice and expertise has given me several choices in doing this. Thank you for all your wise suggestions! I wish you continued success!
Hi Erin, glad you get some value here on how to pay off your mortgage faster. Some of the strategies have worked for me, and it will do the same for you if you stay consistent to the task.
Many has follow some of my advice and did get results so I know these strategies work if you work it. Please feel free if you need further explanation or additional information as you implement these suggestions. Talk to you soon.
Dear David,
Thanks for the great advice and you have provided loads of valuable information. Thanks for sharing. All the nine points you covered are very useful.
Your Friend,
Paul
Hi Paul, glad you get some value here on the nine points that I covered on how to pay off your mortgage faster. If you put just a few of them to use, it will begin to work for you as it did for me. All the best.
Take a look at the amortization schedule for your mortgage amount and interest rate,and you will see that even at current low mortgage rates, that you will be paying twice again at least for your home in mortgage interest for your home over the 30 years schedule, and that the tax benefit you get is trivial compared. Worse, most people who make moderate incomes and have relatively small mortgages do not benefit from the tax deduction at all. While mortgage debt is better than other debt, especially if your mortgage payments plus taxes and maintenance are at parity with local rents for comparable properties, you are better off with no debt at all and more secure.
Thank you for the comment and your input in paying off your mortgage. I did consider the payment at a low mortgage rate only if you pay that exact amount and most people make that mistake, that is why I proposed that you pay more and find ways to do that.
You are right about the ones with low income would not benefit from the tax deductions hence the reason for starting a home business of your own to offset some of these taxes depending on what state you are in. here in New York, the tax breaks are high and can work for you if done right.
Your last comment about having no debts and being more secure is well received. Thank you for your thoughts and insights.