Did you know that by paying off your mortgage early, you can end up saving thousands of dollars in interest? It’s true. Refinancing or making extra payments on your mortgage can help you pay it off faster, but is it right for you? The ideal choice depends on your financial situation. Read this guide to learn more about how to pay off your home loan faster and find the best strategy for you.
Split Your Payments
By splitting your mortgage payment into two installments every month and sending half of the payment every two weeks, you’ll end the year with an extra 13 payments or four to six years shaved off your loan. Plus, most mortgage companies welcome these extra payments, giving you a boost on your way toward homeownership.
Be Ready with An Extra Payment
If you are not looking forward to sending biweekly payments, you can save yourself some hassle by making an extra payment on your home loan once a year. If you have money left over after paying your taxes during the filing period, or if you receive a bonus in a given year, you might want to put that money toward accelerating your payments and reducing the amount of time it will take you to pay off your loan.
Add More Money to The Principal
If your budget doesn’t allow you to make an extra payment each year, try sending a little more each month. This could be enough to shave years off your mortgage and pay it off early. Round up your regular payment to the next $100 amount, or add $100 to your regular monthly payment to figure out how much to send. Contact your lender to verify how additional payments are applied to your mortgage loan. If you send in extra money every month, it will reduce the term of your loan and save you money in interest payments.
Recast Your Mortgage
Consider paying off your mortgage if you get a lumpsum payment, such as an inheritance or other windfall. Loan companies usually offer a lower payment option called “recasting” when they receive a higher upfront sum toward the principal. Recasting maintains the same term as the original loan agreement but lowers the monthly payment. If you continue making the same amount of each month’s payment and apply the extra amount toward the principal, you will pay off the mortgage in less time.
