Now that you’ve made a down payment and secured financing for your home, all that’s left to do is pay off the remaining balance. Here’s how to pay off your mortgage faster.
- Choose a home you can afford
- Refinance to a short-term loan
- Make bi-weekly payments
- Put windfalls towards your mortgage
- Pay off your other debts
- Be frugal
When you apply for a loan, the lender will take a look at your financial situation and make an estimate of how much you can borrow for a home.
Buyers often set their housing budget around this number, but before you make an offer on a home, examine your monthly budget and find out how much you can realistically spend on housing.
Buying a home just below the amount that the lender suggests can give you more leeway when it comes to paying off your mortgage faster.
If you took out a 30-year mortgage on your home, consider refinancing to a 15-year mortgage to help you go through it a lot faster. You’ll have to pay more each month, but given the quicker time frame, you’ll also be paying less in interest.
Instead of a single monthly payment, arrange to pay half that amount every other week. So if the monthly payment is $1000, ask the bank if you can pay $500 every two weeks instead.
A biweekly schedule won’t have much of an impact your budget, but it will amount to 13 full payments each year instead of the usual 12, since there are 52 weeks in a year.
This allows you to make an extra payment each year without having to come up with extra money.
If you get a tax refund, bonus, or cash gift, make an extra payment on your mortgage. This will give you a quick start to paying off your home loan.
The same goes for when you get a pay raise. If you start making an extra hundred dollars at work, put that money towards your mortgage. You won’t even miss it, since you’re not used to having the additional amount in the first place.
Manage your debts by clearing high interest credit cards and existing loans before overpaying your mortgage. This prevents interest from building fast and makes it easier for you to stay on top of your monthly payments. So if you’ve been struggling with your student loans and car payments, start with those first.
There’s simply no getting around it – you have to make changes to your lifestyle if you’re to pay off your mortgage early. That means bringing your own lunch to work, eating out less, putting off exotic vacations, cutting back on credit card expenses, and avoiding impulse buys.
And while you’re at it, find additional sources of income to help you put more money towards your mortgage payments. This will help ease the burden on the breadwinner of the family and give you extra money to spend.