The standard mortgage is repaid over a term of 30 years. This can seem like a lifetime to anyone, regardless of age or position in life. Some borrowers choose to set up an automatic payment every month for the amount of the mortgage payment and let it ride for the full 30-year term. Other borrowers choose to get aggressive and pay the loan off faster, saving them money on interest and giving them more equity in their home. If you are looking for free and relatively easy ways to pay off your mortgage faster, the following tips will help you shave payments off the end of your mortgage and save money on interest payments.
Make an Extra Payment Every Year
One of the easiest ways to pay off your mortgage faster is to make an extra payment each year. You can do this in one of three ways. The first is to write a check or make an online payment for an amount equivalent to one monthly payment. You can do this when you get a bonus from work, get your tax refund back at tax time, or if you come into some extra money elsewhere. If you don't have this type of opportunity, you can make an extra monthly payment by adding 1/12 of a normal mortgage payment to each monthly loan payment. You can also pay one-half of your mortgage payment to your lender every two weeks. As there are 52 weeks in a year, this adds up to 26 half payments or 13 whole mortgage payments. No matter which method you choose, you are chipping away at the principal on your loan and getting the mortgage paid off faster.
Pay a Little Extra Here or There
You may not have a lot of room in your budget to make a whole extra mortgage payment each year. This doesn't mean you can't pay off your mortgage early. Throw what you can toward the mortgage payment every month. Even five or ten dollars extra can make a huge difference over the lifetime of the loan, and cut several payments off the end of your loan.
You can also refinance your loan and choose a shorter term, such as 15 years or 20 years. This will allow you to pay your mortgage off much faster. However, the refinancing process can be as involved as the original mortgage process, and you may be on the hook for closing costs again. This may cost you money upfront that you don't have to spare. Weigh this option carefully and get as much information from your lender as possible before choosing to refinance.
For more information, contact an expert in loans and financing, such as Marty Fekete.