Sam Wordley Shutterstock Do you want to pay off your house and shred your mortgage contract a lot sooner than you planned?
There are a variety of options for paying off your mortgage faster.You won’t even notice the increase in your monthly payments if you use the right strategies, such as the ones listed below.
Make two-weekly mortgage payments.
The average homeowner makes 12 mortgage payments per year.However, if you make half-payments every two weeks, you’ll make 26 half-payments per year, or 13 full payments.
It’s essentially the same as making 13 monthly payments instead of the usual 12.
To take this route, contact your lender and inquire about the best course of action.Some lenders will set up such payments for you.Alternatively, you may prefer to send the additional payments by mail or electronically.
Make sure to designate any extra payments to principal whenever you make them.Otherwise, your lender may consider it a prepayment of your next monthly payment.
Paying for mortgage acceleration programs should be avoided at all costs.It shouldn’t cost you anything extra to pay down your mortgage faster.
Put as much money as you can into your mortgage.
Every windfall you get, such as bonuses and gifts, should be put toward your mortgage principal.
However, it’s possible that you’ll find better ways to spend your extra cash than paying down your mortgage.If your after-tax mortgage interest rate is 4% and you can earn 8% on your money in the stock market, you should probably take the 8%.
Your payments should be rounded up.
Make it a habit to round your monthly payment up.If the number is 1013, pay 1020 or even 1100.
If you do this on a regular basis, you’ll be able to shave years off your mortgage while experiencing little discomfort.
Make one additional payment per year.
This is an alternative to making a two-weekly payment.Make an extra payment at the end of the year as a holiday gift to yourself.Do it whenever you want.
Alternatively, you can simply add one-twelfth of your mortgage payment to each month’s payment.For example, one-twelfth of a 1013 monthly payment is approximately 84.As a result, you’d pay $1097 per month instead.
Refinance your loan to a shorter term.
Shorter-term loans typically have lower interest rates than longer-term loans.Borrowers who opt for shorter terms, such as a 15-year mortgage rather than a 30-year mortgage, can save a lot of money in the long run, though their monthly payment will almost certainly increase.
Refinance and make it look like the loan is shorter.
If the idea of locking into a shorter mortgage with higher monthly payments scares you, you can achieve a similar result by refinancing into a cheaper 30-year mortgage and paying it off sooner.
You won’t be able to take advantage of the lower rates available for shorter-term loans, but you’ll still save a lot of money on interest.
This option necessitates willpower because you are making a larger payment each month than is required.However, if you run out of money, you can revert to your smaller required payment.
Determine whether refinancing is a viable option.
Refinancing your mortgage is option 5 and 6.Determine whether refinancing is a good move for you before considering those options.
The value of refinancing is determined by the various associated costs, whether interest rates are low enough to justify a refinance, and how long you plan to stay in the house.To be a good deal, you must stay long enough to recoup your expenses.
The mortgage refinance calculator on myFICO can help you estimate your costs.You can also shop around by telling a few mortgage lenders how much you want to borrow and getting their fee estimates.
Tip: Wait until you’re ready to apply for a loan before giving lenders permission to pull your credit report.When a lender pulls your credit report, it can lower your credit score temporarily.
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