5 Ways to Pay off your Mortgage Faster

Deciding to purchase a home is an exciting time! There’s the researching, meeting with a real estate agent, and visiting homes to find the dwelling of your dreams. Then you go to your mortgage professional and are absolutely shocked by the numbers in front of you. The cost of borrowing doesn’t come cheap and homebuyers can become discouraged quickly by the idea of paying off a loan for the next 30 years. Lucky for you there are many simple ways to help you pay off your mortgage faster!

1. Think Long-Term

Mortgages shouldn’t be treated as a one-time contract you need to deal with. You will likely hold a mortgage on your home anywhere from 10-30 years. That’s a long span of time in which many changes can take place. You need to stay informed about rate changes and new mortgage options that may arise. Just because you made a commitment to a certain term and rate doesn’t mean you can’t change it. There are always options to refinance your mortgage with a better interest rate if percentages go down, which could end up saving you thousands of dollars!

2. Choose a Biweekly Accelerated Payment

Making biweekly payments means that a payment is taken from your account every 2 weeks. A regular biweekly payment takes the annual amount owed and divides it by 26 payments. This method is a good choice for people who are paid biweekly. The only catch with a regular biweekly payment is that it really doesn’t help pay down your mortgage any faster. With an accelerated biweekly payment you actually pay a slightly higher amount on every payment that goes directly to the principal. This brings the overall borrowing cost down and helps you reduce the length of your mortgage considerably over time!

3. Take Advantage of a Variable Rate

A variable interest rate fluctuates based on an underlying benchmark that changes over time. Historically, it has been found that mortgages do better with a variable rate rather than a fixed rate because of its sensitivity to market changes. The great results seen with variable rates often involves coupling the method with aspects of a fixed interest rate. If you choose a variable rate and set your payments to match what the fixed rate would have been you end up overpaying each month. This extra money goes directly to the principal and ends up saving you thousands in interest dollars!

4. Be Smart with Unexpected Funds

Unexpected sources of funds are often right around the corner. There are birthday cards containing money, tax refunds, and promotions that can bring extra money into your household. The trick is to be smart about what you do with these unexpected funds. Though it may be tempting to splurge on a trip to Mexico right away, it is extremely beneficial to put that extra money towards your mortgage! With promotions, people are often tempted to upgrade their lifestyle through everyday purchases. If you’re already living comfortably a simple way to pay down your mortgage faster is to continue with your normal habits and put extra money towards your mortgage each month. Watching the years come off your mortgage term will be well worth it!

5. Round Up or Commit to a $1/Day

Simple agreements with yourself can help chip away at that mortgage term. You could commit to putting aside a dollar a day towards the mortgage. Though it only contributes around $30 a month, this small change could save you thousands in interest every year! You can also round up all your payments. Say you have a payment due for $560 and decide to round up to the nearest hundred every month, so you pay $600. That’s $40 extra dollars going towards the mortgage! Though monetary in amount per month, those small contributions add up and could help take a couple years off your mortgage!

Though many of these options are attractive it is best to see your mortgage professional to discuss if any of these tactics would work for you. If you have any high interest debt on your credit cards then it may not be a good idea to put extra money on your mortgage until you have the interest on those cards paid down. Similarly, if you have no emergency fund or savings for retirement then it may be more beneficial to keep paying down your mortgage in the format you originally agreed to. The best way to discover if you can reduce the length of your mortgage term is to see your mortgage professional today!