Mortgage payments are some of the biggest expenses that many households deal with, so it’s understandable that you’d want to get rid of them sooner rather than later. Just think about how happy and free you’ll feel when you’re finally done.
It might sound impossible, but the truth is that a few tactics might help you achieve this goal sooner. No, it’s not magic, it’s just changing a few things about how you spend money. You’ll chip away at your debt little by little if you follow our tips without even having to make huge changes to your lifestyle. Before you know it, poof, it’s gone!
So, here’s our list for 7 painless ways to pay off your mortgage ahead of schedule!
1. Make Mortgage Payments Every Two Weeks
If you, like most people, make 12 monthly payments per year then you’re missing out on the opportunity of reducing your mortgage by years. The simplest, most effective way to start is to split your current payments in half. Then make half-payments every two weeks.
You’ll find that you’ll be making 26 half-payments, which account for 13 full payments compared to the 12 you started with. Pretty clever, right?
So, say you have a $200,000 mortgage with a fixed interest rate of 4.5 percent. By following this tip not only will you pay everything off in 25.6 years instead of 30, but you’ll also save $28,037 in interest.
In order to do this, call your lender and ask for the best approach, they’ll be happy to set you up with such payments. Alternatively, you could send the extra payment electronically. Whichever the case do not forget to apply all payments to the principal. If you don’t the lender will treat the second payment of the month as prepayment for the next month!
And whatever you do, don’t even go anywhere near mortgage acceleration programs. You can do this easily without lifting an extra finger yourself, you don’t have to pay extra for any such services.
2. Pour Every Bit of Extra Cash Into Your Mortgage
Depending on your financial situation, it’s a good idea to dedicate every extra bit of money you gain towards your mortgage, including bonuses and gifts. Though you might want to splurge and get yourself something nice with the extra cash, think about all the things you could splurge on after you’re done with your mortgage early!
Your lifestyle won’t change suddenly if you put that bonus or that gift elsewhere, and you’ve been able to make ends meet without them, right? So why not put it towards something useful. Your future self will thank you for it!
3. Round up Your Payments
You’ll feel even less pain and relatively no strain if you round up your mortgage payments. How you round up is up to you but, obviously, the more money you add the less you’ll have to pay in the long run.
For example, say your payments are $1,013, but you could pay $1,020 or $1,100 instead, depending on your financial situation.
4. Make One Extra Payment a Year
Our first tip basically encouraged you to make an extra payment per year without feeling the burn. This is an alternative to that. If you don’t want to make half-payments then make an extra full payment at some point in the year. Some people prefer to do this during the holiday season as a gift to themselves, others do it at random, in whichever month they feel most comfortable.
Another idea is to add one-twelfth of your usual payment to each month’s payments instead. Again, if you usually pay $1,013, then add $84, bringing the total to $1,097 instead. Don’t forget to round up after that!
5. Refinance Into a Shorter Loan
Interest rates are what really make mortgage payments difficult. By opting for a short-term loan you can lower them significantly. You can refinance from a 30-year mortgage to a 15-year mortgage and save big.
Of course, by doing so you’ll increase your monthly payments, but talk to your lender an ask them how much money you could save, interest wise if you go with this plan. We guarantee you’re going to want to take that deal!
6. Refinance and Pretend It’s a Shorter Loan
Our earlier tip might not be for everybody. Making bigger monthly payments could be quite daunting to certain households, but you can get close to the same effect if you refinance your 30-year mortgage into a cheaper one. Then, pay it off on a shorter schedule.
One thing to keep in mind is that you won’t save as much money as with a shorter loan, but it’s still worth it if you’re looking for ways of minimizing your interest.
All you have to do is make larger payments than you are required to. This alone will require a lot of willpower because you alone will be responsible for doing this, so it’s important to stick to your guns.
However, this option is also beneficial if you’re worried that somewhere down the line you might need the extra cash. Instead of locking yourself into a shorter loan period in which you will be forced to make those big payments, you can fall back on the easier, smaller payments for a while instead. Once your period of hardship is over, you can go back to the bigger payments, no problem!
7. Decide If Refinancing Is Cost-effective
Stop! Before you decide that our earlier tips sound too good to be true, you have to make sure that refinancing makes sense for you. It’s not a one-size-fits-all kind of deal. You might find that it’s the opposite of helpful!
Try out FICO’s mortgage refinance calculator first of all, then shop around! Tell several lenders how much you want to borrow and ask for their estimates fees. Do not give anyone consent to pull your credit report, though. It will ding your credit score, so you must only do it when you’re ready to actually apply for a loan.
Just remember that refinancing isn’t an easy decision. There are associated costs, you have to think long and hard about the rates, you have to figure out if you’re going to stay in your home for much longer anyway… all those little things might make it so that refinancing will work for you, but it’s not the same for everybody, that’s why you need to be careful.
What do you think? Are you ready to pay off your mortgage faster than you ever thought possible? Which one of our tips are you willing to go for?
- You might also like: 13 Simple Home Hacks to Save Money