5 Ways to Pay Off Your Mortgage Early
Purchasing a home is a dream for pretty much everyone but taking on mortgage debt can feel like an uphill battle. Pay off your loan faster and save more money in the process by following these 5 easy tips!
Biweekly Mortgage Payments
To pay off a mortgage faster and pay less in interest over the loan’s lifetime, some homeowners choose to make bi-weekly payments instead. Bi-weekly payments mean that you’re paying half your monthly amount once every two weeks instead. There are 52 weeks in a year, so this works out to 26 bi-weekly payments or 13 monthly payments.
Make an Extra Payment Annually
One of the easiest ways to save money on your mortgage is by making an extra mortgage payment each year. These extra payments are automatically applied on your principal, not interest. Not only does your remaining balance drop, but you will not have to pay interest each month on that principal for the remainder of the loan term.
Cut Your PMI
Many buyers take advantage of low down payment options which incurs a private mortgage insurance (PMI) fee because their down payment is less than 20 percent. These buyers, however, can petition their lender to cancel the insurance as soon as their mortgage balance falls below 80 percent of the home’s appraised value. If your home’s value has gone up or if you have repaid some of the principal, it might be time to cut your PMI and save on your monthly payment.
You have a few refinancing strategies to choose from in order to pay off your mortgage faster. First, you could choose to refinance at a lower interest rate and apply the savings toward your principal. Second, you can shorten the loan from a 30-year loan to a 15-year loan and take on the higher payments until the loan is paid off. Finally, if you already have a low interest rate, you could save on the closing costs of a refinance and simply pay on your 30-year mortgage like it’s a 15-year mortgage.
Take advantage of any financial windfalls or gains that come your way. Applying incoming funds like tax refunds, work bonuses, family gifts and inheritance sums can go a long way in paying down your mortgage quicker!
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One of the biggest hurdles aspiring home buyers face is saving enough for a down payment, but you may be closer than you think.