- What to Know:
- Refinance home loan > Make additional payment > set aside additional cash > increase principal payments > make unexpected funds.
It’s easy to be intimidated by the prospect of paying off your mortgage early. After all, we’re talking about debt that’s in the hundreds of thousands of dollars. Today, paying off that much debt would be very impossible (unless you’ve won millions or had a wealthy relative pass away). Plus, you can’t just swipe your credit card and be done with it. Paying off your mortgage early, on the other hand, may cut months or even years off your payment schedule, boosting your equity and saving you a lot of money in interest payments. I’ll show you how to pay off your mortgage early in this article.
You may pay off your mortgage early in a variety of methods, ranging from simple changes to your monthly mortgage payments to more difficult and costly choices like refinancing. Paying off your mortgage early can help you achieve financial security while also saving you money in the long run by reducing the amount of interest you pay.
Here are some ideas for getting your mortgage paid off faster:
Refinance your home loan
If interest rates fall, you may be able to lower your interest payments by refinancing your mortgage. You might also choose to drastically shorten the length of your loan.
Make additional payments on your mortgage
Making additional mortgage payments is another method to save money on interest while shortening the duration of your loan. Consider the following early mortgage payment methods if your lender does not impose a penalty for paying off your mortgage early.
Just make sure to tell your lender that your excess payments should go toward the principle rather than the interest. Otherwise, your lender may add the funds to future planned monthly payments, resulting in no savings.
Set aside additional cash for your mortgage
Every year, a large number of taxpayers receive a tax refund. You may make significant progress toward paying off your property if you utilize the majority, if not all, of that money as an extra payment on your mortgage. A bonus from work, a successful yard sale, or a gift from a relative are all examples of possible windfalls. Also, if you get a raise, think about putting all of the extra money toward your mortgage.
Increase your principal payments
Most mortgage lenders will enable you to make an extra payment and designate it “principal only” when you turn in your monthly payment, meaning that this contribution will go toward paying down the principle rather than both the principal and interest on the loan. Paying down even a little amount of extra principle early in the loan may save you a lot of money in interest fees, as well as get you out of the debt many years sooner. As a result, consider making an additional principle payment to the loan holder every month.
Make the most of unexpected funds
Send any unexpected windfalls to your mortgage company right away. Holiday bonuses, tax returns, and credit card incentives are all examples of this. This money will not be deducted from your usual monthly budget.
Is it possible to pay off your mortgage in one go?
You can make a lump sum payment to assist you pay off your mortgage faster rather than making additional or biweekly installments to chip away at your debt. A mortgage recast is the term for this procedure. Your lender recalculates your mortgage to reflect the payment once you pay the lump sum toward your principle.