Having a 30-year mortgage might make you feel like you will be paying off for your house forever.
And you will wonder if there is a way to cut the time, which doesn’t require you to spend a lot of extra cash.
Luckily, there are indeed some strategies you can incorporate to do the same. In this article, we bring you seven practical tips for paying off mortgage faster.
Table of Contents
#1 Refinance your mortgage
Refinancing your mortgage will allow you to reduce the amount you pay toward interest, should the interest rates decline. This may also allow you to reduce your loan term significantly. Refinancing is one of the common mortgage payoff tips.
#2 Start making extra mortgage payments
One of the best ways to pay off your mortgage early is to pay one extra mortgage every year. You don’t have to worry about the budget because if you choose to pay 1/12 extra, you can do it under budget.
However, always remember to check with your mortgage payment company. Some companies charge you fines for prepayments.
#3 Make use of that extra cash
Apart from your usual monthly income, sometimes you get holiday bonuses and tax returns. Use them for mortgage payoffs as they won’t affect your monthly budget. In this case, also check with your lender whether it is alright to make extra payments.
# 4 Make bi-weekly payments
Use an online bi-weekly mortgage calculator like this one and ask your lender whether they carpet mortgage bi-weekly. If yes, you can split your monthly mortgage payment in half and pay it every two weeks.
By using this strategy, you can make about 13 months of payments in a year. You can cut 1-3 years from the repayment time on a 15-year mortgage, depending on the amount of loan and interest rate.
#5 Recast your mortgage
In mortgage recasting, you get to keep your existing loan, unlike refinancing. What you do is pay a lump sum toward the principal, where your bank works on readjusting the payoff schedule to reflect the new balance. This means a shorter loan term.
But make sure if your company allows a mortgage recasting.
#6 Rent out extra space
There are many ways to get extra income. You can incorporate a sharing economy. While you are out on vacation, you can consider listing your extra space at Airbnb and make some extra money by renting out. You can use this extra money for a mortgage payment.
#7 Create room on your budget
Take out some extra money from your monthly budget and try to more than the monthly amount due. Extra money can take you places you won’t realize. But also make sure you do not compromise on other necessities just to pay off your mortgage sooner.
Frequently Asked Questions about Paying Off Mortgage Faster
Should you pay off your mortgage early?
Most people want to get rid of debts as soon as possible, and with various mortgage saving tips, they try to pay off early. But paying your mortgage off early comes with risks.
If you have taken care of all your other financial needs or retirement funds needs, then it is okay for you to pay off your mortgage. But focusing on mortgage pay off by neglecting other financial needs is not advised.
How to live mortgage-free?
One of the best ways to live mortgage-free is to invest in a house below your budget or downsize your house.
You can also choose to build a home by yourself, which will take time, but you can live mortgage-free.
What happens when you pay off your mortgage?
After you pay off your mortgage, you will get various release documents of your loan’s being paid off and various others from your bank. The bank documents will include statements that your mortgage has been paid off and a canceled promissory note.
Your lender is likely to send a notification to the city or county recorder about your official status, mentioning that you are the rightful owner of the property. But in some cases, it is your job to update the status.
If you have any funds left in your account, you will get your money back from your lender, but you also handle your own property tax and insurance payments related to homeowners.
Is it worth paying off your mortgage early?
There are surely some advantages to paying off your mortgage early. The first one being the fact that you don’t have to make any monthly payments after it is paid off, which means your monthly budget can increase a little. You can use this little money for your hobbies like traveling or movies every week.
Paying off a mortgage has both pros and cons, and no matter how much you hear people’s stories, it is purely based on your living conditions whether you will benefit from paying it off earlier or not.