The best way to pay off your mortgage faster is to take that first step. Starting small makes it less daunting and even a small contribution can make a big difference.
1. Cut Costs Monthly – If you feel like there isn’t enough extra money coming in each month to pay extra on your mortgage, look for places to reduce spending. Skipping your morning latte can save $15-$20 a week. Apply that money to your mortgage instead and you can contribute $1,200 towards your principal balance in a year.
2. Round Up – If your mortgage bill is $1,423.00 each month consider rounding that number up to $1,450.00. Making your payment an even number puts $27 extra against your principal each month. This may not seem like much but every payment towards principal reduces your interest payment.
3. Use Your Tax Return – If you are someone that gets a tax return each year consider applying your tax return toward the principal balance of your mortgage. This lump sum will allow you to keep your monthly payments as low as possible but still benefit from an annual principal reduction.
4. Pay Bi-Weekly – Instead of making one monthly payment on your mortgage, divide your payment in half and pay that amount every other week. If you paid monthly you would make 12 mortgage payments a year or 24 half payments. By making a half payment every other week you will end up making 26 half payments which equals out to be one extra mortgage payment every year.
5. Refinance – Some of us just aren’t good at paying extra. If you can afford more but don’t have the discipline to pay extra talk to your loan officer about refinancing to shorten the term of your loan. Interest rates are still very low and if you can afford to refinance to a 15 or 20-year loan you will cut years off your payments and pay less over the life of the loan.
30 years may seem like a very long time however these extra payment options can cut years off your loan and save you thousands over the life of your loan. To better understand how mortgage interest works take some time to learn about mortgage amortization and how every reduction in principal translates into a reduction in mortgage interest paid.
If you are interested in the possibility of refinancing your loan to a shorter term contact Title Mortgage today and find out what the current rates are on a 15 and 20-year mortgage. Our team will help you make a smart financial decision that will be the most beneficial for you in the long run.