Many people dream of becoming homeowners. However, buying a house is a capital-intensive process. Luckily, you can take out a mortgage, which allows you to own the home as you pay off the loan periodically. If you already have the loan financing, it’s prudent to clear it early to avoid the stress of owing money. It also saves you money in the long run. The tips below will help you pay off your mortgage earlier.
Opt For Biweekly Payments
Most mortgage loan repayments are scheduled monthly, but you don’t have to wait until the end of the month to repay the loan financing. Ideally, you can split them into biweekly payments. This means you’ll have made 24 full monthly payments in a year, which cuts the repayment schedule by half. Check if your lenders accept biweekly payment plans because some will charge you a fee.
Pay an Extra Amount Every Month
Consider paying extra every month. The extra money adds up and covers some months, meaning you reduce the repayment period. In turn, you reduce the monthly interest, saving in the long run. If you live in a rental house, consider moving to a cheaper one and channel the amount you save to a mortgage. Approximately a third of renters move yearly, so this lifestyle change is clearly very common.
Commit To Making Extra Yearly Payments
At the end of the year, you might get some extra money like end-of-year bonuses, tax refunds, inheritance, or a sale of a valuable item. You can put this extra-earned money to good use by making lump sum payments. It will reduce your interest and your loan repayment period. Take time to buy items like jewelry, find the best deals, and use the saved amount to repay the mortgage. 35% of couples spend less than three months researching what ring they want and where to buy before an engagement.
Refinance Your Mortgage Loan to a Shorter Term
Mortgage rates have increased over time due to inflation. Consider refinancing your loan with shorter payment periods. While the monthly payment amount will slightly increase, loan financing attracts a lower interest rate.
Consider Recasting Your Loan
Mortgage recasting is also another way to help you pay your loan faster. Unlike refinancing, the existing loan terms remain the same. Essentially, you make a lump sum payment towards the principal balance, and the lender will re-amortize the loan to reflect your new balance. Recasting helps save interest on the loan and reduce your monthly payment. Note that your lender might charge you a recasting fee.
Consider Getting a Loan Modification
We all go through difficult moments. If you aren’t in a position to pay for your mortgage, consider a loan modification. Your lender may lower your interest rate, enabling you to pay your loan faster. This arrangement is meant for borrowers with financial hardships due to unemployment, disability, or loss of income. Be aware that this may have consequences on your credit depending on how your lender reports it to the credit agencies.
Consider Downsizing Your Home
Downsizing can be drastic, but it’s prudent if you want to pay your mortgage faster. Consider trading your home for a less expensive one. You will reduce your mortgage debt and might have extra money to pay off other debts. If you are considering selling your house, making improvements like a new painting will boost the curb appeal and attract more buyers. Blue-gray is the most popular color for a house exterior.
Paying your mortgage earlier reduces the interest rate payable and gives you peace of mind. There are numerous ways to achieve this goal, including paying a little more monthly. It’s the small actions that count.
So, what do you think ?