Luckily, there are plenty of ways to liquidate your mortgage faster. With these strategies, you will hardly distinguish the increment in your monthly payments. For a little help, listed below are five ways to pay off your mortgage faster. So, say goodbye to your home loan before it even ends and cut down a substantial amount your interest payments.
Biweekly Mortgage Payments
Biweekly mortgage payments’ concept is clear and understandable. All you have to do is pay your home loan half its payment every two weeks. As such, you can make 26 half-payments in a year which is equivalent to 13 full monthly payment. The result is you are effectively paying one additional month every year without feeling that you’re paying too much.
To start off a biweekly mortgage payment, find the interest and principal fraction of your “supposed to be” monthly payment, and divide it by two. Say, for example, the interest and the principal fraction of your payment are $1,500. Then your biweekly payment will be $750.
But do not forget to add the insurance and tax fraction of your payment. $750 only includes the interest and principal portion, so you still have to pay for the insurance and tax portion of your payment.
Be sure to check if your lender or mortgage company offers this type of payment program. Some will charge you an additional fee correlating to the payment program, while others do not. But, under any circumstances, don’t pay it just to take up a biweekly mortgage plan.
If, in any case, your mortgage company is not open for this payment program, then set up a different bank account intended for your home loan payment. Stash your payment every two weeks and make use of that deposited money to pay your home loan every two weeks.
Think About Refinancing
Refinancing is the reinstatement of your current loan with another loan under different terms. Meaning, you are getting a new debt obligation to be able to pay off your former home loan at a much lower interest rate.
For example, by refinancing into a fifteen-year mortgage, you can pay off your home loan for the next 15 years. Though your monthly payments will likely go up, you will undoubtedly pay off your mortgage a lot faster and have no debts sooner.
But, it is wise to consider refinancing when the interest rates are low. However, to be able to refinance a property you must undergo a series of closing costs. Closing costs are a compilation of administrative fees necessary to undertake a new loan. So before deciding to refinance your home, you must consider the associated fees into your calculation and budget.
For sure, downgrading your property can be an extreme and radical step. But if you have already decided on paying off your home loan, think about marketing your current property and make use of its profits to purchase a smaller, low-priced home.
Downsizing to a smaller home means having a smaller amount of mortgage, fewer property taxes, and lower utilities. So, it is worthy to consider this process if you do not need large spaces.
And with the financial gain from marketing your enormous house, you might be capable of paying full cash for your new property. But even though you have to have a small mortgage, still you have thrived in minimizing your debt.
So, at this moment, your target is to eliminate that debt as fast as possible. The lesser your debt, the faster you can pay it off.
Put Unanticipated Cash on your Mortgage
Have you ever earned “unexpected” money like commission, bonus, inheritance, or tax refund? If yes, then deposit some or all of it at your home loan. Let’s face it, you did not anticipate for this unexpected windfall, so you managed to exist without it. Strictly speaking, you do not need this money.
A lot of people misspend this extra cash by buying unnecessary things or often dining out. And then they will suddenly realize, where did the money go? So, why not deposit or put that unexpected windfall to your mortgage.
For all you know, it can effectively lessen the years off your mortgage. However, the drawback of this approach is that it is kind of difficult to forecast the home loan payoff date. Still, nevertheless, this approach is effective. Also, be sure that this approach is within your lenders rule so that your extra contributions will go to your mortgage.
Maximize your Down Payment
For sure, the most excellent way to purchase a property is with 100% down payment. Even though, paying cash for property seems odd and bizarre, but think of all the days you could have without a home loan dragging you down.
If you cannot delay the acquisition until you can pay cash, then think about putting at least 10% down payment at the closing table. Sure, 20% is much better because then you can now avoid paying PMI. Private mortgage insurance or PMI is an additional payment attached to your monthly payment to assure your lender if you cannot pay enough.
Private mortgage insurance usually rates between 0.5% and 1% of the mortgage annually. Say, for instance, you owe a $250,000 home loan, the PMI will charge you at least $2,500 a year. So why offer a bank more money if it does not get rid of your mortgage faster?
If you don’t like the idea of mortgage payments that can, usually, last for 30 years, then pay off your mortgage as early and quickly as possible. You don’t have to follow that kind of schedule. Luckily, there are many ways to pay off your mortgage faster. Follow the ways above to know more. Don’t forget to consult professional firms like Ashe Morgan to know what is the best approach for you.