- Paying off the mortgage early means 2 things.
First, you get more money each month. Secondly, you save money by avoiding interest. As such, paying off early is an ideal idea. There are tips which can help you with that. Of them all, here are 6 that are most effective. Let’s check them out.
2. Save more and pay more
The first tip is almost mandatory. It is highly recommended and used today. Basically, save more money on your expenses. There are countless things to do that. For example, add $100 per month to your payments. You will save $23.000 when you pay off mortgage. This applies if you took $250.000 loan. You will also pay off mortgage 4 years sooner! Control your expenses and invest them into a mortgage! For instance, bring lunch to work. Use coupons when shopping. There are million ways you can do this.
3. Always choose a 15-year mortgage
Yes, it is obvious. People usually choose a 30-year mortgage due to lower payments. However, a 15-year mortgage isn’t more expensive. It saves you money and time. For instance, you will pay $169.000 in interest. This applies to all $250.000 loans over 30 years. Your payment will be $1.165. With 15 year mortgage, you will pay $65.000 in interest. But, your payment will be $1.700 per month! It may look scary option, but it does save money.
4. Use extra payments
Extra payments are an amazing tip as well. A bank can move some funds to a separate account. This can be done each month. You can add extra payments per quarter or per year. Extra payments can save you up to $38.000 in total. We are using a $250.000 loan as an example again. But, you also pay off your mortgage 7 years earlier. Contact your bank today to get the needed information and details.
5. Benefit from biweekly payments
Biweekly payments are 26 payments per year. You pay 50% of the payment in 2 weeks. In general, you still have 13 payments per year. It may sound like the previous tip, but it isn’t. This one helps you pay off the mortgage in less time. You save money by paying less interest. Not all lenders offer this perk. Don’t pay for the fee to convert to this payment form.
6. Get a smaller house
Use this tip if you want a much lower monthly payment. First, sell your house. Get a smaller one. Your monthly rate will be much lower. In some cases, you can pay off the mortgage completely. It may look like losing, but it isn’t. You can advance when ready.
Recast when you can
Recast isn’t a popular term. It means that you will make a large payment. A borrower who won the lottery is an excellent example. In return, your rate is decreased. With this method, you can save up to $32.000 in interest. You can also decrease your monthly payment by 10-40%. Some lenders will have a fee for recast! Luckily it is usually a low fee.
These tips can help you pay off your mortgage early. Ideally, you will use all of them. If that is impossible, use more than one. Savings are massive. Benefits are even more important. However, there are no drawbacks in this case. Less time paying, more money in the end for you.