Are you trying to pay off your mortgage fast without paying penalties? By knowing how and when to increase your mortgage payments, you can cut significant time off of your mortgage term.
homeandgardeningguide.com gathered the following information, suggestions, and tips about paying off your mortgage early.
Can I Pay Off My Mortgage Early Without Paying Penalties?
Yes, depending on the loan agreement with your mortgage company. However, you may only be allowed to make extra payments at certain times.
It is essential to remember that as you pay down your principal, the interest rates also go down over time. This translates to less money the financial institution will make from your mortgage. Early pay off fees and penalties are designed to keep you in your mortgage for its full term.
Before you begin making extra or larger payments, read through this article. Then contact your mortgage company and define what you can do to pay down your principal, reduce interest rates, and pay off your mortgage (without being penalized).
Make Biweekly Mortgage Payments
Biweekly mortgage payments allow you to make the equivalent of 13 monthly payments per year. The year has 12 months, but there are 52 weeks. Making a payment every two weeks will result in 26 payments for the year, or 13 months worth of payments. The following will help you get started:
• The idea here is to pay half of your monthly mortgage payment every two weeks. You can calculate the amount by using your last monthly statement. Locate the principal and interest portion of your regular payments and divide that by two. Then calculate the tax and insurance portion of your payment and include it in your payments.
• Contact your mortgage company to see how they process biweekly payments. Some lenders refuse to process partial payments while others will work with you.
Tip: If your mortgage company refuses to accept biweekly or partial payments, open a bank account exclusively for this purpose. Make your biweekly payments to this new account and write a check or make an online payment (for the full mortgage payment amount) after every second deposit.
Note: By using biweekly mortgage payments, and depending on the loan’s interest rate, you can reduce your mortgage term by several years.
What Else Can I Do To Pay Off My Mortgage Fast?
As you’ve seen, you can take years off of your mortgage by making just one extra payment per year. Here are some ways to put more money towards your mortgage and save tens of thousands of dollars over your mortgage term that you may not have considered:
Pay Off Your Credit Cards And Loans – Besides eliminating other monthly payments, you will save money by not paying interest on credit card and loan debt.
Apply what you were paying on your credit cards or loans to your mortgage payment.
Stop Eating Out for Lunch – Get your Superheroes lunch box out of retirement and start making your own lunch. If you were spending $8 per day eating out, that comes to about $160 per month that you could now be putting toward your mortgage.
Stop Smoking – If you smoke a pack a day at $6 a pack, you are burning (literally) $180 per month. Besides using that money to pay off your mortgage even faster, you will increase your overall health, reduce your risk of developing cancer, and live longer.
Cancel Subscriptions – If you have paid subscriptions to music platforms, newspapers, movie sites, etc., cancel them. The $30 to $40 per month can convert to thousands of dollars of interest you won’t pay on your mortgage loan.
The idea here is to change your spending habits. If you can move from “it’s just $5” or “I can afford this” to “let me invest this $5” or “I don’t need this” and apply that money towards paying off your mortgage, you win.
Extra (Unexpected) Money – You may be getting a windfall like a sizable tax return, bonuses from work, a pay raise, an inheritance, etc.
The more of these unexpected treasures you put towards your mortgage, the sooner you can pay it off, and save in interest. You shouldn’t even miss the money, you were already used to living without it.
Visit homeandgardeningguide.com/improvement/finances/3-tax-deductions/ for ways to use home improvements as tax deductions.
Recast Your Mortgage – If you receive a sizable windfall that can significantly reduce your principal, some mortgage companies can re-amortize your loan. For this, the term remains the same, with your monthly payments lowered based on the reduced principal.
Refinance Your Mortgage – If your income can handle it, refinance your 30-year mortgage to a 15-year fixed-rate mortgage. Unless you want to be in debt for 30 years. However, if you already have a low interest rate, you can always pay your 30-year mortgage like it’s a 15-year mortgage.
Sell Your Home – Put the equity you’ve built up to work for you. If your intent is to eliminate your mortgage, consider downsizing as an option.
Use the profits from selling your home to put a sizable downpayment on a smaller home or pay cash for it. If you have to get a small mortgage, you have still succeeded in lowering your debt. Now get to work paying it off.
Note: Before you increase your mortgage payment amounts, switch to a biweekly schedule, or change your payment habits in any way, contact your mortgage company. Verify that your intended modifications will not incur any penalties, fees, or additional expenses.
Pay Off Your Mortgage Fast
In this article, you discovered information and tips to help you increase your mortgage payments and pay it off quickly.
By taking action and increasing your mortgage payments, you can significantly reduce the amount of money spent on interest rates and shave years off of your mortgage.
If you choose to accept and pay your mortgage as it is, you are giving the mortgage company money that could be yours. The sad part is that you’ll be doing this for 30 years.
Visit https://www.homeandgardeningguide.com/improvement/finances/ for more financial resources, and tips.