Mortgages are great, they allow people to buy homes even if they don’t have hundreds of thousands of dollars in the bank. But you know what’s better than a mortgage? Paying it off! Here are six tips that can help you pay off your mortgage faster, saving you thousands of dollars in the process.
6 Ways to Save Big by Paying Off Your Mortgage Early
Make lump sum payments
Did you know that paying $1,000 at the end of every year will shorten your mortgage by two full years? That’s 24 months of mortgage payments, if you pay once a month. Not only that, but it saves you over $11,000 in interest over time. Check with your mortgage provider to see the possibilities of making lump sum payments. If you can do it, it’s worth it. Think about putting bonuses, high commission checks and raise differences towards your home. Paying now means saving that amount plus accrued interest later.
Make bi-weekly payments
By cutting your mortgage in half and paying every two weeks, you’ll be able to squeeze a few extra mortgages into the year and shorten your mortgage by 2.6 years. By getting into the routine of paying half your monthly mortgage every two weeks, you’ll be setting yourself up for a shorter mortgage and you won’t necessarily notice a change in the moment. For example, focusing on paying $1000 every two weeks (assuming the monthly mortgage is $2000) allows you to budget accordingly. Paying your mortgage this way can also save you almost $20,000 in interest over time. Think about all the ways you could spend an extra $20,000…
Shorten your amortization
Think how much you can afford per month. If your mortgage is $2,000 a month, but you’re consistently able to pay more than that toward your mortgage, think about shortening your amortization. Switching to a 20 year amortization schedule will not only cut 5 years off our mortgage but will save you almost $35,000 in interest over time.
Now let’s see how much interest you can save if you do all three of these things at once. Making lump sum payments of $1000 at the end of each year saves $11,000 over time, making bi-weekly payments instead of monthly payments save you almost $20,000 over time, and shortening your amortization schedule can save you almost $35,000 over time. That’s over $66,000 dollars you’re saving in interest.
Round up payments every month
Something as simple as rounding your monthly payments up to the nearest $100 can save you years of paying your mortgage. For example, if your mortgage is $2310, pay $2400 a payment instead. These extra $90 will add up fast.
Make an extra house payment each quarter
If you’re able to do this trick, you can pay off your mortgage 11 years sooner. Sometime during summer, fall, winter, and spring, make an extra house payment and you’ll end up paying 4 months extra over the course of the year. Doing it this way allows you to pay 33% extra during the year without having it pay it all at once.
If you’ve been really focused on lowering your mortgage, and you’re comfortable with a smaller space, talk to your realtor about downsizing. The cash you get from selling your current home will cover a significant amount if not all of your mortgage on the new home. Even if you still have a mortgage on the new home, chances are you’ll be able to eliminate mortgage insurance and pay a lower monthly mortgage. With a smaller debt the quicker you can eliminate the mortgage.
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Do you have questions about your current mortgage or home loan options? We can help! Reach out to our experienced team and get the answers you need.