Paying off a mortgage faster often makes sense. By cutting off a few months, or years, of your mortgage’s life, you actually increase the amount of money you have in your pocket long term. For many people, this means saving thousands of dollars. You probably would love to pay off your mortgage and not have to make that monthly payment each month, but you may think it is too hard or too complex to do. The fact is, with a few simple tools, you can do just that.
There are several ways to work to pay off your mortgage faster. The key is to find out if your mortgage company offers these options and then to spend some time comparing the costs associated. In the best case scenario, you do not have to pay any fees.
Paying Two Times Per Month
Instead of paying $1500 onetime per month, pay $750 two times per month. This is an easy way to pay no more on your mortgage each month, but to end up paying less on your mortgage and cutting down the cost for the long term. How does this work?
- Each year, there are 52 weeks, which for most people who are paid every two weeks, there are 26 pay periods.
- While there are only 12 months in the year, if you make 26 payments, you end up making a full extra payment each year just by paying every two weeks.
This method can save you thousands of dollars over the life of your loan.
Pay A Bit More Each Payment
It goes without saying that paying more towards a debt each month can help you to cut down on the costs of your loan overall. However, it does not take a lot of money paid each month to do this. If you can afford to increase the amount you pay per month by just $100 to $200 more, you will pay off your loan far sooner, cutting into the amount of money you owe.
The trick to making this plan work for you is to focus specifically on paying down principle debt. This is the actual debt you borrowed, not interest tacked on to the debt. By paying towards the principle, this allows you to pay the amount you owe down faster, which in term means less interest is applied to that principle. Most mortgage loan companies will allow you to stipulate where the extra money each month will go, to principle or interest.
To make the biggest impact on your mortgage debt, and to pay off your mortgage even faster, combine these two methods. This way, you can cut down on the length of your loan considerably, and end up paying far less than you would otherwise. For many people, the mortgage is the single most expensive investment they will make in their lifetime. Why not pay less without actually feeling like you are doing so? Chances are good that you will find yourself in a better financial place for doing just this.