A 15 to 30-year mortgage is understandably intimidating, but you can have peace of mind knowing there are numerous ways to tackle paying off your loan. An aggressive approach has long-term benefits – you’re able to get your home loan off the books earlier and avoid paying thousands of dollars in interest.
PrimeLending is here to help you strategize and execute your game plan. Here are our best practices for paying off your mortgage faster:
Making One Extra Payment Each Year
Budget permitting, it might be wise to allocate a certain amount each month to make one additional payment each year. The amount is up to your discretion – check out our calculator to determine what kind of an impact making an extra payment can have on your mortgage. This might seem negligible, but it can truly make a noticeable dent in your loan – you’re accelerating the loan term, therefore saving on interest.
Rounding Up Your Payments
Is your monthly mortgage payment $1,257? Probably not, but whatever your monthly payment amount is, round up and apply the extra money to your principal balance. So, in this instance, if you pay an additional $43 every month toward your loan, that means you’re paying more than $500 toward your principal balance every year.
Setting Up Biweekly Payments
Did you know paying half of your monthly payment every two weeks means you make an additional payment every year? Because there are 52 weeks in a year, half payments every two weeks will total 13 full payments by the end of the year instead of 12. This two-pronged approach negates the impact one hefty payment would have on your finances and expedites lowering your total mortgage amount.
Before choosing this payment cadence, ensure your lender allows biweekly payments – some lenders deny this strategy to avoid losing out on interest.
Refinancing Your Mortgage
Does a lower interest rate, possibly a full percentage point lower, appeal to you? If the answer is yes, a refinance might be your best option for paying off your mortgage faster. As the market fluctuates, so do interest rates – by paying close attention to current industry rates, you might be able to strike when rates are low enough to make it worthwhile! Not only is there potential to lock in a lower rate, you might also be able to refinance for a shorter term, or if possible, a shorter term at a lower rate. Before refinancing, do your homework, ensure you have the budget and seek council from a PrimeLending loan officer to make sure this is the right choice for you.
If any of these strategies seem like a smart solution for your situation, talk to a PrimeLending Home Loan Expert and get started today!
