Are you ready to start chipping away at your mortgage at an accelerated pace?
For those homeowners who are fully funding their retirement accounts, are free of high-interest debt and have enough cash socked away for other life goals, here are four simple tactics may help you to pay off your mortgage early on your home.
1. Refinance into a shorter-term mortgage: If you have a 30-year mortgage consider refinancing it into a 10-, 15-, or 20-year loan. With a shorter-term mortgage, you will pay significantly less interest, but only if you can afford the higher monthly payment. Use this calculator to compare different mortgage terms, and let us help you decide which term is better for you. If you want a quick calculation, check out our Mortgage Calculator Mobile App.
2. Make an extra mortgage payment every year: Even small additional principal payments add up over time. On a $150,000 loan for 30 years at 3.75%, with no additional payments, more than $100,000 will be paid in interest over the course of the loan. By adding just $100 per month in principal payments, you will reduce the total interest paid by nearly $25,000 and the loan will be paid off more than six years sooner.
3. Set up bi-weekly mortgage payments instead of making 12 monthly payments, this equals out to 26 half-payments — or 13 full payments — per year. Give us a call before you start with a bi-weekly payment schedule. We will make sure your extra payments are applied to the principal of the loan and not being applied towards the interest. Use our Mortgage Calculator Mobile App to the calculate your savings.
4. Round up your monthly payments: This is similar to making bi-weekly payments. If your monthly payment if $815, try rounding your payment up to $900. The extra $85 goes toward the principal. Early in a mortgage, most of your regular payment goes toward interest.
As always, if you have questions about paying off your mortgage early, please. We would be happy to review your current financial situation and help you determine the best course of action for your unique situation.