6 Ways to Pay Off Your Mortgage Faster
Wednesday, October 26, 2016, 6:00 AM | Leave Comment
Paying off your mortgage faster is a good goal for many reasons.
The longer it takes you to pay down your mortgage, the more that you actually end up paying overall.
By eliminating this debt more quickly, you can actually greatly reduce the total amount that you pay for your home over the years.
If you decide that this is a good idea for your financial situation, you still have to determine how to do this.
As it turns out, there are several good ways to pay off your mortgage faster.
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Pay a Little Extra Each Month
The most straightforward way to pay down your mortgage quickly is simply to pay a little more than you usually do each month. This money is not thrown away. Even a small amount overpaid with each monthly installment on your mortgage can make drastic changes in the rate at which you eliminate this debt.
Just adding ten percent to each monthly payment can lower the amount of time spent paying off the mortgage by as much as four or five years. The overall savings in dollars adds up to tens of thousands, depending on how much you owe at the start.
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Refinance with a 15-Year Mortgage
You may have already seen offers from your lender to refinance with a shorter-term mortgage. Switching from a 30-year mortgage to a 15-year schedule obviously eliminates the debt that much more quickly. It does not have to be as challenging financially as you might think, either.
If you have already paid five years of your 30-year mortgage, you can refinance with a 15-year loan and shave 10 years off your total pay schedule. The savings are even more drastic than they are when you just pay extra each month.
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Make One Extra Payment per Year
If your finances won’t allow for regular extra sums thrown into your mortgage, you can make an additional payment once per year. Suddenly doubling payment may not be easy financially so you can do this in a subtler fashion.
If you make one payment every four weeks, rather than once per month, you will make thirteen payments per year since there are 52 weeks per annum.
You will barely notice the extra expense while you reap tens of thousands in savings over the course of your mortgage and take several years off your total pay schedule.
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Put Extra Money into the Loan
Every once in a while, you may receive additional income in the form of a bonus or you may just stumble into the money when you win the lottery or have good night at the casino.
Though you might be tempted to throw this money into a luxury purchase, you can knock down your home loan more quickly by throwing these funds at the mortgage whenever possible.
You may also just want to direct your tax refund in this direction each year and enjoy the savings over the decades.
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Make Biweekly Payments
This plan is similar to the plan which involves making a mortgage payment every four weeks. You still end up making 13 payments each year, but you gain added speed because you are making the payments every two weeks and reduce the long term interest because there is less time spent at each interval between payments.
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Sell the Home and Buy a Smaller Residence
If you have several years and a lot of equity in your home, you may be able to sell it and use the earnings to buy a smaller house outright.
Each of these methods is valuable to different homeowners. You need to decide which one applies best to your situation while accomplishing the savings that you desire.
You might consider reaching out to a real estate expert at a program like Success Path Education for more help.
A little practice in self-control and planning for the future could save you a lot of money over the long term.
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