The early bird, as they say, catches the worm. In the context of a mortgage, paying it off early will allow you to reap some great financial rewards, such as being debt-free and saving money by paying less interest. If you are looking to pay off your mortgage as quickly as possible and save extra cash, check out these strategies.
Simply Pay More
Your principal balance decreases whenever you pay extra on your mortgage. One way you can pay more is to change your payment schedule from monthly to biweekly. To do this, divide your annual payment by 12 months then pay half of that monthly payment every two weeks. As there are 52 weeks in a year, it will result in 13 monthly payments all in all, shaving months off on your total mortgage balance.
Before you start adding extra payments to your mortgage, however, remember to get in touch with your mortgage provider. Some companies may charge a prepayment penalty or receive additional payment only during specific times (every February, for instance). Make sure that the extra payment you’re making goes to the principal balance and not as a pre-payment for the succeeding month.
Downsize Your House
This major step requires you to sell your bigger home and use the profit you collected to buy a home that’s smaller and less expensive. A smaller mortgage, after all, is easier to pay off. When selling your home, get in touch with an experienced real estate agent whose advice can help you save time and money.
Consider Mortgage Refinancing
If you have a fixed-rate, 30-year mortgage and want to pay it off in half the time, see if you can refinance it by applying for a 15-year mortgage at a lower interest rate. Be prepared, however, to pay higher monthly payments. The great thing, though, is the potentially large savings you’ll get when you pay your mortgage off at a lower interest rate.
These pieces of advice can help you pay off your mortgage early and allow you to save extra money. Apart from mortgages, these tips are also applicable for other types of debt. For instance, you can further decrease a credit card debt when you put in more money instead of paying the minimum balance.