Whether you’ve committed to pay off your mortgage in 15 years or 30, you may find yourself anxiously counting down the days until you finally own your home fully from the time you send out your very first monthly payment. The truth is, the longer it takes you to pay off your mortgage, the more interest you’ll incur and the more total money you’ll have to spend, so paying your loan off before the terms expire can be a wise move financially. While it’s impossible to pay your mortgage off overnight – unless you win the lottery or otherwise strike it rich, that is – there are a few easy ways you can cut years off your payments and own your home fully sooner than you think. Before you start making extra payments, however, check the fine print of your contract to make sure your lender won’t penalize you for prepayment.
#1 Set Up a Payday Schedule – Instead of making one monthly payment to your lender, arrange for your loan to be put on a payday schedule. The amount you pay each month will stay the same, but the payment will be broken up into smaller payments that occur every time you get paid. At minimum, this will double the total number of payments you make each year, and more of the money you pay will go directly to your principle balance instead of covering interest. The faster your principle balance is paid down, the sooner you no longer owe.
#2 Rework Your Budget – Look over your finances and see if there’s anywhere you could scrounge up extra cash to put toward you mortgage every month. Something as simple as forgoing your morning latte could provide an extra $100 to add to your monthly payment. Make a commitment to yourself to put part of your expendable income toward your mortgage payment on a consistent basis, as the extra money will go directly toward your principle. This could easily cut years off your repayment plan if you succeed in doing this each and every month.
#3 Put Your Tax Refund Toward Your Principle – When you get your tax return every year, use the full amount to make an extra annual payment toward your mortgage. Depending on how high your return is, this could be one of the most effective ways to cut down the number of years you’re repaying, as a few thousand dollars extra toward your principle every year will go a long way.
#4 Make a Double Payment Every Quarter – Every three months, double up your normal monthly payment. As with other methods mentioned, the extra money will all go directly toward your principle.
#5 Put All Unexpected Income Toward Your Principle – Whether you win the lottery, receive a large monetary gift for your birthday or are given an inheritance, put any unexpected income from outside your paycheck directly toward your mortgage. Since you weren’t counting on this money when budgeting for bills, your current finances won’t suffer but your principle balance could shrink considerably.
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