Just thinking about paying off your mortgage in full can be pretty unnerving. We are talking about hundreds of thousands of dollars anyway. Paying that much money can sometimes feel impossible. However, there’s an easier way to shave off years of payment schedules and saving you lots of money in interest payments.
1. Do a biweekly payment
Instead of making monthly payments, you can make half-sized payments every two weeks. If your usual payments is $2000 a month, you would instead pay $1000 every other week. This will result in 13 full-sized payments in a year instead of the normal 12. You’ll be making an extra payment every year without even adjusting budgets.
2. Make extra principal payments
When sending your monthly payment, you can add an extra amount and have it marked “principal only”, and this payment will go to pay down the principal rather than both the principal and interest on the loan. Doing this every now and then can help you save quite a lot in interest charges.
3. Refinance into a shorter-term loan
If you have a 30-year mortgage, refinancing it to a 15-year loan will make your journey a whole lot faster. Shorter loan terms are typically paired with lower interest rates. You also have a choice of refinancing it as a 20-year loan if 20 years is more than you can afford.
4. Put your windfalls into your mortgage
Almost all taxpayers get a tax refund every year. If some of those refund is used as an extra payment on your mortgage, you can make serious progress in paying off your loan. Other examples of windfalls would be bonus from work, or a gift from a relative, or a raise.
You may be wondering what the big deal is. No one really cares if you pay off your mortgage in 15, 20 or 30 years. But paying off your mortgage early can be one of the best things you can do for yourself. You can use the extra money you pay on interest to other things like your children’s education, retirement or starting a business. Just the idea of being free of debt brings a whole level of satisfaction.