Paying off the mortgage on your home faster means that you will not only have the satisfaction of owning your own home sooner, you will also have the benefit of paying much less in interest over the years.
The faster you pay off your mortgage, the more money you can save, so here are some tips to accelerate your payment schedule.
Pay Your Mortgage Every Other Week (Bi-Weekly)
Did you know that if you take your monthly mortgage payment and divide it in half and then pay it every two weeks that you will end up making a full extra month of payments every year? This is called a bi-weekly payment program which has been around for a long time, and it’s still a good idea today!
You likely won’t notice the difference since the extra half payments occur in long months with bigger paychecks, but over the years this will end up saving you thousands of dollars in interest payments.
Make a Bigger Monthly Payment
Similar to the bi-weekly payment plan above, you can accomplish the goal by dividing your principal and interest portion of your payment by 12 and then adding that amount to your regular monthly payment. You will be paying that extra payment every year, but spacing it out over each monthly payment.
Most homeowners using this tactic can shorten their term by up to seven years.
Put Any Windfall Toward the Mortgage
Was your tax rebate larger than you expected? Have you received an inheritance from your great aunt Thelma? Have you won a cash prize in a contest?
Put any unexpected chunks of cash straight toward your mortgage instead of spending them. This won’t affect your budget at all, because you were never expecting or counting on that money in the first place. But once again, it can make a huge difference in the overall amount of interest that you pay on your mortgage loan.
However, keep in mind your particular situation. Spending every last penny paying off your mortgage as quickly as possible might not be the best option for you if you have no emergency savings fund or if you have a credit card languishing with high interest debt.
It is usually more important to deal with these pressing financial issues before attempting to save money on your mortgage.
One great way to start your research on how to pay your home off faster is to talk with your trusted mortgage professional. They can answer your questions and point you in the best direction for your situation.