If you’re on a 30-year mortgage, it can seem like there’s no end to your mortgage payments. But, you can cut your loan term significantly by using the strategies mentioned below.
- Pay Every Two Weeks: Rather than pay your mortgage lender every month, consider making bi-weekly payments. By the end of the year, you would have paid the equivalent of at least 13 monthly payments. If you use this strategy, you can shave at least a few years off your 30-year mortgage, helping you save a significant amount of money over time.
- Make an Extra Payment Each Year: If you don’t want to go through the hassle of making two payments every month, you should at least try to make an extra payment once a year. A bonus at work or a tax refund could provide you the cash to make this extra payment. Ensure that you budget for this right from the start of the year.
- Refinance Your Mortgage: If your credit score has improved significantly since when you first got your mortgage, you may want to consider refinancing your loan. But, when you do this, ensure that the new loan has a lower interest rate and a shorter term. While your monthly payment may be slightly higher, it will help you repay your loan a lot quicker and save on interest, as well.
- Opt for a Flexible-Term Mortgage: Most home buyers opt for a loan term of 15 years or 30 years. However, many lenders offer flexible-term mortgages, so you may be able to choose loan terms between 15 and 30 years.
- Round Off Your Payments: If you can’t make a whole payment every year or make bi-weekly payments, consider rounding off your payments. So, if your mortgage amounts to $1,140, consider paying $1,200 every month. If you keep doing this, you’ll likely be able to pay off your loan much quicker.
While paying off a mortgage fast is great since it can help you save up for other financial needs, it’s important to remember that mortgages typically have lower rates in comparison to credit card debts. So, if you are carrying a balance on your credit card, consider paying that off first. Also, building a substantial emergency fund should take precedence over repaying your mortgage loan.