While many homeowners make monthly mortgage payments, millions enjoy the luxury of owning their homes outright. If you strive to join their ranks, there are a number of ways you can expedite the completion of your mortgage – and none include lottery tickets.
Below are three ways you can pay your mortgage off faster.
1. Making Extra Payments
There are several ways you can make extra payments. Consider doing one of the following options, or doing a combination of them.
- Make an extra payment each quarter (4 extra payments/year).
- Divide monthly payment by 12 and add that amount to each monthly payment (adds up to 1 extra payment/year).
- Pay half of your mortgage payment every two weeks – aka biweekly payments (this also adds up to 1 extra payment/year).
- Make an extra payment whenever you can. If you receive a bonus at work, tax refund, or win a sweepstakes, consider putting that extra money toward your mortgage. Just be sure to have your lender apply it to your principal balance.
2. Rounding Up
Round your mortgage payments up to the nearest ten, twenty, or even fifty dollars, so that you’re paying at least a few dollars more each month.
For example, if your monthly mortgage payment is $930, you could round it up to $950, putting an extra $20 toward your mortgage per month ($240/year).
3. Refinance to a Shorter-Term Mortgage
Refinancing into a shorter term mortgage will most likely make your monthly payments increase, but in return it will help you pay off your loan much sooner, therefor avoiding additional interest fees.
If you can comfortably afford the higher payments, and if you can lock in a lower interest rate, then refinancing into a 10-, 15-, or 20 -ear mortgage could be a great decision.
You may be surprised to find out that even making a few additional payments a year can really help reduce your mortgage balance sooner. If you want to crunch the numbers and see exactly how making extra payments will affect your mortgage contact a mortgage professional or talk to your accountant.
While all of these tips are pretty reliable ways to pay down your mortgage, please consult a financial advisor before acting on a strategy.