Having a mortgage can sometimes feel like a cloud of debt looming over your head. The longer it takes to pay off your mortgage, the longer you have to be under that cloud of debt. This article will discuss how to pay off your mortgage early so you can be free from that dreadful debt.
One of the easiest ways to pay off your mortgage earlier is to pay a little bit more each payment. The higher your payments are the more of it goes into your principal balance. It may help to have a set amount you pay more for each monthly payment. A good way to plan out how much you pay is to divide your monthly principal and interest by 12 and add that to the amount you pay monthly during a year. This way you end up paying off 13 payments in just one year. It might not seem much but the extra payment can save you a lot of money on interest and save you a couple of years of payments. However, you should discuss with your mortgage company about extra payments since some only take extra payments at certain times or will charge the extra to the next month’s payment.
If you can’t afford to pay more every month, you can save enough to make an extra payment at the end of the year. The 13th payment can be marked down by your mortgage company as “principal only”; this way you only pay to the principal instead of the principal and interest. Usually, principal only payments can only be done at certain times of the year so be sure to talk your company about principal only payments.
You can also make 13th extra payment by switching to a biweekly payment plan. You will pay almost the same as a monthly plan but at the end of the year you will have made a 13th payment. This extra payment may not be principal only but it does provide the same effect as an extra payment at the end of the year. Using a biweekly payment plan can help you shave almost 5 years off your mortgage plan.
You can also pay off your mortgage sooner by refinancing it into a shorter-term mortgage. A 30-year mortgage can be refinanced as a 15-year mortgage which can save you a lot of money in principal and interest as well as 15 years. Refinancing into for a shorter mortgage term is only recommended if the interest rate is lower because you might end up paying more for a shorter-term mortgage with a higher rate.
Paying off your mortgage early can help take some stress off your shoulder and help you put more money into your retirement. However, paying off early is something you must discuss with your mortgage company to ensure that you don’t end up spending more. Your mortgage company can help you determine the best plan of action to help you pay off your mortgage early.