Buying a home is probably the most important deal in your life, and your home loan is the biggest investment you will ever make. And surely, a mortgage is what most people would like to pay off as quickly as possible. It is known, that more than 20 million Americans own their homes outright. So many homeowners have the goal of making the last mortgage payment one day. So, this article is all about getting out of debt sooner and smarter. Bear in mind that analyzing your mortgage time by time will help you do savings and get the mortgage off your back more quickly. So, here are a few suggestions to help you do it.
Round up your payments
Round up your payments so that you pay $10-50 extra money each month. Even a very small amount will reduce your mortgage. For example, if your monthly mortgage payment is $1468, round it up to $1500 by putting an extra $32. This is a great option for people with some additional cash to pay their mortgage off faster. In this case, you’ll pay it off almost two and a half year sooner. There are several online round-up payment calculators, which will calculate your savings. Don’t hesitate to check them out and pay off your mortgage faster.
Use your “found” money
Get a tax refund? A bonus? An unexpected windfall? Make sure to use some or all of your newfound money to make an extra mortgage payment. This is one of the best strategies, as you don’t have to make higher monthly payments. If you make $5000 during the whole period, you may save up to $15000 and shorten your mortgage repayment term by 15-16 months. So, if you use your annual bonus, you’ll save much more.
Go for biweekly payments
Making smaller payments more often will save you money as well as help you pay off your mortgage faster. For example, if your monthly payment is $2400, pay $1200 every two weeks. You’ll save 3000$ each year. Isn’t that fantastic? So, contact your lender and change your payments schedule. Just note, that twice a year, you’ll have to make a payment three times a month instead of 2. Be sure to have enough funds on your account or keep cash money for those payments.
Refinance and use the difference
Here you have options – refinance to lower interest rate or refinance to shorten your loan’s time frame. You may ask your lender to review your interest rate. Just be prepared to have the following paperwork: proof of income, your tax returns for some previous period, copies of asset information and proof of investments. If you have income irregularities, make sure to know what to answer to lenders’ questions about them. Don’t be afraid of smaller lenders. You could find smaller and non-traditional lenders and get cheaper rates. Don’t worry about what may happen if your lender has financial trouble, as you have got their money, and it’s you who has to pay to the lender, not the opposite. If you think you can afford, apply for a 15-year mortgage. The interest rate is lower than for 30-year mortgages. Still, this option is not quick or free. Make sure to consult with your loan officer and get professional help with this.
This may seem a bit difficult, but if you could afford to make 13 payments in every 12 months, you’ll save tens of thousands of dollars, as well as slice years from your mortgage. You can also double up your payments time by time. If you’re not sure about your income and what you can afford, just make sure to overpay some $10-15 every month. If you’re too worried about the rates, you could take a split loan. It is also known as a combination loan, which allows you to take part in your loan as fixed and part as a variable. Besides, you can try to make payments at higher rates. For instance, you have a loan at about 4%, pay it off at 5%. Not only you won’t notice the rates go up, but you will also be paying off your mortgage quicker. Or, if you make an extra payment each quarter, you’ll save $60-70000 and pay off your mortgage 8-10 years earlier.
By: Hermine Aslanyan
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Additional Valuable Resources:
How to Lock in Your Interest Rate by Eric Khan via Total Morgage