This mortgage. Sometimes it really hangs over your head, doesn’t it? However, with the right mindset and the commitment to pay off your mortgage, you can pay off early.
It can save you thousands of dollars in the long run if you do decide to make that commitment. Take a look at this example:
You borrowed $ 150,000 on a house with a 30-year mortgage at 4% per annum. By the end of 30 years, you will almost double your spending because you will pay over $ 107,000 in interest!
Thinking about how much you owe as a percentage can make you feel a little nauseous, so let’s see how you could pay off your mortgage early.
1. Get the side fuss.
You may need some extra cash to make additional mortgage payments, so why not consider the side hustle and bustle?
If, after a typical nine to five dinner, you automatically tend to try burgers, remember that you don’t have to take a job at Burger Barn to earn side money. You also don’t need to drive people like Uber.
Pick a skill you already have – writing, teaching kids, babysitting – whatever you love to do, and hurry up with it.
Know that you don’t have to make an incredible amount of money with the side hustle and bustle to influence mortgage payments.
Let’s take a quick look at what happens if you add just $ 100 to your mortgage payment each month. You would pay $ 25,000 less interest. You will also reach a whopping loan maturity 70 months earlier than if you had just made a regular monthly mortgage payment.
2. Pay payments every two weeks.
Are you currently paying the planned mortgage payment every month? If so, run (don’t walk) to your computer (or call your lender directly) and change your mortgage scheduled payments to bi-weekly payments instead.
What is biweekly payment? You decide to split your regular monthly payment in half and send the payment every two weeks. In other words, let’s say you usually pay $ 1,500 in monthly mortgage payments. On a bi-weekly schedule, you will be charged $ 750 every two weeks.
Why are biweekly payments helping you get ahead? After all, isn’t it the same as making the same full payment every month?
A natural annual calendar works to your advantage. As a result, you make 13 payments instead of 12, which is 26 half payments.
You’ve already budgeted that $ 750 to be withdrawn from your account every week, so you might feel a little pinch with this 13th payment, but it could save you a lot of money in the long run.
3. Refinance your mortgage.
Refinancing your mortgage simply means that you choose either a lower interest rate or a shorter term on your mortgage – or both. You can also get cash out of your home equity when refinancing.
However, one of the best ways to pay off your mortgage earlier is to refinance your mortgage for a lower term. For example, you can choose to refinance from a 30-year mortgage to a 15-year mortgage.
For example, suppose you bought a home for $ 200,000 at a 4% interest rate for 30 years. You will pay $ 955 a month, and over 30 years the house will cost you $ 343,739 (if you don’t pay at all).
On the other hand, let’s say you chose a 15 year mortgage with an interest rate of 3%. You will pay $ 1,381 a month and will cost you $ 248,609 over 15 years (no down payment).
You will own your home faster and save a lot of money if you upgrade to a 15 year mortgage. As you can see, 15 year loans have lower interest rates but higher monthly payments.
4. Round off your mortgage payments.
Not interested in refinancing or a biweekly payout? Simply rounding your monthly mortgage payments to the next $ 100 can have a significant impact on the early payment of your mortgage.
How could this work? You pay $ 1100 instead of $ 1002. Or maybe you pay $ 1,000 instead of $ 960. Any small amount you deposit over time can lower your total interest and allow you to pay off your mortgage faster.
5. Gradually increase the amount you pay.
This option requires serious commitment from you. Make a reminder on your calendar to increase your mortgage payment on the first of every month for the entire year. Choose to increase your mortgage payment by a predetermined amount — for example, $ 25. (This is less than dinner at a restaurant!)
By the end of the year, you will add another $ 300 to your annual mortgage payments! By gradually increasing the amount you pay, you will never notice the difference.
6. Apply windfall income to your mortgage.
Did Grandpa Gertie leave you money when she died? Instead of spending money on a hot tub, use this surprise gift to make an extra mortgage payment. While it doesn’t really seem fun to use windfall income in this way, it might make the most sense if you want to pay off your mortgage early.
List other ways you can use your extra income to pay off your mortgage. Consider applying any additional amounts to your mortgage, such as year-end bonuses, tax returns, or holiday gifts from parents or grandparents.
Use a combination of tactics
You can’t go wrong with any of these approaches if you want to pay off your mortgage ahead of schedule. In fact, you can even use a combination of these options. Why not use windfall income, refinance your mortgage as well as to use bi-weekly payments right away?
Criticizing mortgages from different angles can help you achieve your goals in no time. You may even end up paying off your mortgage earlier than you expected because you will gain momentum to pay off your mortgage!
Featured article: What is QQQ ETF?