How Can I Pay Off My Mortgage Earlier?
Paying off a mortgage and officially owning your home is a liberating feeling. You no longer have to worry about the stability of your future when it comes to housing. It can take decades to pay off a mortgage, but those who want to quicken the process can follow these three tips.
Pay extra each month
The most obvious answer is to take whatever leftover money you have at the end of the month and make an additional principal payment. Attacking the principal with extra monthly payments not only will reduce the amount you owe, but it significantly lowers the amount of interest that you pay over the life of the loan.
A common strategy is to take your monthly payment, divide it by 12 and make a separate principal-only payment at the end of every month. Be sure to label the additional payment “apply to principal.”
One trick to shorten your mortgage payoff is to pay half of your usual monthly payment every two weeks. You could even have it automatically deducted from your paycheck if you are on the standard bi-weekly pay schedule.
The reason this works is there are 52 weeks in the year, so a bi-weekly payment translates to 26 half payments or 13 full payments per year. That will net you one full extra payment each year.
Make an extra mortgage payment every year
Throw all or a portion of new-found money like a year-end bonus or inheritance at the mortgage. The earlier into the loan you do this, the more of an impact it will have. In a typical 30-year mortgage, about half the total interest you pay will accumulate in the first 10 years of your loan. That is because your interest rate is calculated against the very high principle amount you owe in the early years.