Check out three easy ways to pay off your home loan/mortgage early!
An Extra Habit
Each time you pay extra on your mortgage, more of each payment after that is applied to your principal balance. Here are some options for paying extra and examples of how extra payments will affect the average $220,000, 30-year mortgage with a 4% interest rate:
Make an extra house payment each quarter, and you’ll save $65,000 in interest and pay off your loan 11 years early.
Divide your payment by 12 and add that amount to each monthly payment or pay half of your payment every two weeks, also known as bi-weekly payments. You’ll make one extra payment each year, saving you $24,000 and shaving four years off your mortgage.
Round up your payments so you’re paying at least a few extra dollars a month.
Increase your payment when you get a raise or bonus.
Refinance—or Pretend You Did
You can refinance a longer term mortgage into a 15-year loan. Or, if you already have a low interest rate, save on the closing costs of a refinance and simply pay on your 30-year mortgage like it’s a 15-year mortgage. The same goes for a 15-year mortgage. If you can swing it, why not increase your payments to pay it off in 10 years?
Using the same stats above for the average mortgage with a 15-year term, you’d need to bump up your monthly payment to about $2,200 to pay off your loan in 10 years. You’ll save $25,000 in interest, but best of all, you’ll be out of debt five years sooner and have $2,200 a month to invest for retirement, save for college or vacations!
Downsizing your house could be a drastic step, but if you’re set on getting rid of your mortgage, consider selling your larger home and using the profits to buy a smaller, less expensive home.
With the profits from selling your bigger house, you may be able to pay all cash for your new home, but even if you have to get a small mortgage, you’ve succeeded in reducing your debt. Now your goal is to get rid of that debt as quickly as possible. The smaller the balance, the quicker you can make it happen.
Using a mortgage calculator and understanding how much house you can really afford will help you make your next home purchase a financial blessing.
Consult a Pro to Find the Right Home
If you’re looking to buy a home that fits your budget or you’re ready to sell your home, consult an experienced real estate agent and lender whose advice will save you time and money.
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