Paying off a mortgage, no matter the loan terms, can be a daunting task for homeowners. Being free of this debt is a goal for most, but, unless you score a winning lottery ticket, its unlikely you’ll be able to pay it off overnight. However, it is realistic to pay off your mortgage months or even years ahead of schedule with a strategic game plan.
Not only does paying off your mortgage early provide peace of mind, but also the potential to save hundreds or even thousands on interest. Luckily, there are several ways to accomplish this financial achievement. Check out some of our favorite practices below:
Making Extra Payments
Obviously, there isn’t a universal mortgage payment structure because everybody comes with their own unique financial goals. However, there is a payment structure that’ll help expedite paying off your mortgage. Did you know a bi-weekly payment plan means you’ll make one extra payment towards your principal each year? Check out this complimentary calculator for a better understanding of the differences between a bi-weekly or monthly payment schedule.
Rounding Up Payments
Is your monthly payment a perfectly even number? Probably not. It might seem small, but if you round up that amount and apply the extra payment to your principal balance, you’ll put a sizeable dent in your loan over time. For example, let’s say your monthly payment is $1,337 and you round up to $1,400 – that extra $63 a month will end up being over $750 annually.
Refinancing for a Lower Rate or Shorter Term
Refinancing can be an excellent avenue for a couple of reasons. Firstly, if you have a 30-year mortgage term, switching to a 15-year term will obviously decrease the years you’ve committed to paying off the loan. Secondly, if you pay attention to market fluctuations, you might be able to strike at the right time and refinance for a rate lower than your current one. Utilize this complimentary calculator to run various refinancing scenarios.
Putting Extra Money Towards Principal
Whether it’s money from a tax return or a bonus from work, its wise to consider putting any lump sums of money received throughout the year towards your principal balance. If you’re not comfortable putting the entire amount towards your principal balance, allocating even a portion of these funds can go along way over the loan’s lifespan.
To learn more about these tactics or explore other options, please feel free to contact a PrimeLending home loan expert today.