The American Dream of homeownership also comes with a price. The price is that it puts you in mortgage debt. If your American Dream of homeownership includes paying off your mortgage early, then you’ve come to the right place. Use these five tips to pay down and pay off your mortgage early. It’ll save you interest in the long run and make you mortgage-debt-free in no time.
Opt for a Shorter Term
The primary way to pay off your mortgage early is to opt for or refinance into a mortgage with a shorter term. Refinance from a 30-year to a 15-year mortgage, for example. In the long-run, you’ll pay less in interest on a shorter term loan, and you still have the options of applying the other four techniques for paying off your mortgage early.
Pay Biweekly
Instead of making a monthly mortgage payment, make half your mortgage payment every two weeks. Some lenders allow you to establish a biweekly payment arrangement without charging a fee to do so. Other lenders have a program that allows you to pay every two weeks instead of once a month, but there is a fee associated with the program. Making a payment every two weeks cuts down on the interest you pay on the mortgage overall, so it shortens the term of the mortgage by as much as seven years.
Round Up on Mortgage Payments
Rarely are mortgage payments an even number. Make additional principal payments on your mortgage by rounding up your payment each month. You can round up as much or as little as you want. Obviously, the more you round up, the faster you will reduce the principal balance of the mortgage. For example, if the mortgage payment is $1,084.36, you might opt to round up to an even $1,085 per month or $1,100 per month.
Make an Extra Mortgage Payment Annually
Mortgage and financial experts say instead of adding principal to your mortgage payment on a monthly basis, simply make one additional mortgage payment per year. This can cut your mortgage term in half. In other words, instead of making 12 payments per year, you’re making 13 payments per year.
Make Lump Sum Payments
If you work in a job where you receive bonuses or commissions, or you receive lump sum payments from various income opportunities throughout the year, apply this money to reduce the mortgage principal. When you receive your tax refund check, use all or a chunk of it to pay down your mortgage principal. When you receive your annual bonus, use all or a portion of it to pay a lump sum payment on your mortgage.
Paying off your mortgage early not only leads you to having one less debt in your life, but it also saves you money in the long-term. Use one or more of these five ideas to pay off your mortgage early and really enjoy living the American Dream.
