While taking out a mortgage is necessary for most people to purchase their homes, the lingering costs can haunt home buyers for decades to come. To reduce the amount of time you spend in debt, consider following these tips for paying off your mortgage faster.
Refinance your mortgage into a shorter-term loan
Refinancing your mortgage from a thirty-year to a
fifteen-year fixed rate loan can save you thousands of dollars in interest and help you pay off your home much more quickly. While you’ll have higher monthly payments, shorter-term loans often have lower interest rates than long-term loans. As such, you’ll be putting more money toward your principal rather than toward the interest.
Make an extra principal payment each quarter
Each time you make a mortgage payment, your lender will allow you to make an extra principal-only payment. By doing this, your money will go directly toward your principal rather than both the principal and the interest. Therefore, you’ll be able to significantly reduce interest costs while paying off your mortgage faster. Just make sure to specify that you’d like the payment to go toward principal reduction.
Use your tax refund to pay off debts
Not everyone has extra money to set aside each month, but the majority of people do receive a tax refund each year. By investing this additional money into your mortgage, you can significantly reduce the amount of time it takes to pay it off.
Make biweekly mortgage payments
Making half-sized, biweekly mortgage payments instead of a standard full-sized monthly payment will allow you to pay off your mortgage faster. Because there are 52 weeks in a year, making a mortgage payment every two weeks will result in 13 full-sized payments each year rather than 12. While it won’t appear to affect your budget too much, you could end up paying off your mortgage as many as five years in advance on a 30-year mortgage plan.
