Want to get your home loan paid off fast? There are strategies you can use to finish making your payments more quickly. Paying your mortgage off early can be a smart move if you can afford it. It will mean saving thousands of dollars in interest payments, potentially. It also can contribute to your peace of mind.
But How Do You Pay Off Your Home Loan Faster?
- Switch to making your payments biweekly. One of the most popular strategies for paying off a mortgage more quickly is to switch to making payments on a biweekly basis. With this strategy, you are still paying the same amount on your loan over the course of a month. But instead of paying it all at once, you are dividing each payment in two and making those two payments two weeks apart. You will need to check if the lender is amenable to this type of payment schedule first. That means asking if they will take your payments in this fashion, and ensuring that there will not be a fee. What is the point in making biweekly payments? You will end up making the equivalent of 1 extra mortgage payment a year if you do this, and you won’t even be thinking about it.
- Make one extra annual payment. This is basically the same as the method above, but you are changing the timing. If you cannot make biweekly payments or simply do not want to, you might find it easier logistically or psychologically to simply make one extra mortgage payment a year. You can also vary this idea, making one extra mortgage payment per quarter, for example.
- Have extra cash? Apply it toward your principal. There may be times during the year when you find yourself with unexpected extra money. You could receive a work bonus, for example, or someone might give you cash as a gift. You could put that money in your savings account, or spend it on something else. But why not put it toward paying off your home loan? JB Broughton of Island Coast Mortgage shared this, “It is psychologically easier to make payments toward large debts and bills when you are spending money you would not otherwise have had. You never really file it into your mental budget of “money that is mine.” Instead, you immediately put it toward your mortgage. That way, it almost feels like someone else paid off a little of your mortgage for you. With this method as well as those above, make sure that you tell the lender you want to apply your extra payments toward the principal. If you do not, some of it might be used to pay off interest, and will not make as big a dent in your mortgage.”
- Try a recast or refinance. Sometimes, modifying your existing mortgage can help you to pay it off more quickly. You have a couple of possible options:
- Recast: If you are able to make a significant lump sum payment to reduce your principal, you might be allowed to recast your mortgage. Through this process of amortization, the lender is able to reduce the amount you pay each month going forward on the same loan term.
- Refinance: Alternately, you could refinance your loan entirely. You might want to switch to a shorter loan term. Or you could change the format of your interest rate. Switching to an adjustable-rate could be a smart move if you think you can pay off the loan in a few years since you could take advantage of the low introductory rate. On the other hand, refinancing to a lower fixed interest rate might be helpful in other circumstances where you will be paying on the mortgage for longer.
- Look for ways to save your everyday life. One more way you could potentially pay off your mortgage faster is to look for opportunities to cut back on your regular expenses. Maybe if you contact your internet company, you could lower your monthly bill and put the overage that you save toward your mortgage. Or perhaps you have some entertainment expenses you do not really need. Maybe you could replace your expensive monthly cable bill with a couple of inexpensive streaming services. You would then have more money to put toward your mortgage.
Want to Pay Off Your Home Loan Faster? We Can Advise You
Island Coast Mortgage has helped a lot of customers to refinance their loans and take other steps toward paying off their mortgage balances fast. We would love to have a chance to chat with you about your financial situation and goals and to give you personalized advice on how you could more rapidly pay off your home loan. To get started now, please give us a call at 239-214-7011.