How to Pay Off Your Mortgage Early
Prepaying your mortgage can save you thousands of dollars of interest. There are a number of ways you may go about shortening the life of your mortgage. Follow these methods to pay off your mortgage faster.Start early. The sooner your early mortgage payoff efforts begin, the more money you will save. Remember that during the first 5 to 7 years of your mortgage payment history, the bulk of your payments go toward interest.
Any amount you pay over and above your mortgage payments goes directly toward the principal amount of your loan; therefore, paying more during those early years is a great way to lower your principal balance at a time when your monthly installments are primarily interest payments.
Apply a lump sum toward your mortgage annually. For example, you may use your tax return money or a holiday bonus directly toward the principle balance of your mortgage loan, on a yearly basis, in order to drastically reduce your early mortgage payoff period.
Refinance into a shorter term. If you have a 30 year fixed mortgage, then refinancing into a 15 year fixed program is a simple way of prepaying your mortgage. In addition to the shortened payment period, lower-term mortgage programs generally come with lower interest rates, which saves you even more money in the long run.
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Make biweekly mortgage payments.
Split your monthly mortgage obligation in half, and pay these partial mortgage payments every 2 weeks, as opposed to making 1 payment per month.
For example, if your monthly payment is $700, then paying $350 every 2 weeks will result in 1 extra mortgage payment a year, and an early mortgage payoff of roughly 7 years for a 30 year mortgage.
You must make arrangements with your lender to pay your mortgage in this way, or you may enroll in a third-party biweekly mortgage payment plan, for a fee. Also, make sure that your lender applies your biweekly payments right away, as opposed to holding them and making a singular monthly payment.
Add a fixed amount to each monthly payment. Choose an amount that you can afford each month, then add that amount to your payment.
Remember that any amount over your monthly obligation goes directly toward the principle.
Send the next month’s principal payment amount in with your monthly payment. Your monthly mortgage bill itemizes the principal and interest portion of your payments.
Sending in the following month’s principal payment with your mortgage payments is a great way to reduce your loan’s principal amount systematically. Read More