Pay down your mortgage faster with these steps
It can seem as though your mortgage will never be paid off, right? It’s a big amount of money and it can seem like an insurmountable task to pay it off. Although it’s true that unless you win the lottery your mortgage won’t be paid off overnight, there are tips and tricks you can use to help pay down your mortgage faster.
Pay more often
Typically, people pay their mortgages monthly. Sites like Kupina Mortgage recommend that you opt for bi-weekly payments instead. This can shave off several years from the time it takes you to pay off your mortgage. Let’s look at a specific example:
The Smiths have a mortgage on which their monthly payments are $1,000. Instead of paying that amount monthly, they could opt to pay $500 every two weeks. It doesn’t make a difference to the bank – they still receive their $1,000 per month. The payments won’t even feel any different to the Smiths themselves because the same amount will be coming out of their account each month overall. So, how can this help them pay down their mortgage more quickly? Because they will effectively be making an extra payment every year by paying every two weeks. (12 monthly payments = $12,000 annually, whereas 26 weekly payments = $13,000 annually). Paying bi-weekly allows you to take advantage of the fact that in some months there are five weeks.
Round up your payments
Whenever you can pay a little more on your mortgage, you cut down on the length of time you’ll have to pay it back. One way to pay a little more each time is to round up your payments. For example, say you normally pay $550 every two weeks. Instead, opt to pay $600. You won’t feel the hit of the extra money very much, but you’ll make a noticeable dent in your overall mortgage amount.
Put found money toward your mortgage
Another strategy to pay a little extra on your mortgage each time is to take any windfalls you receive (such as a raise) and put the money on your mortgage instead of increasing your lifestyle. You’ve gotten accustomed to living on a certain amount of money, and you can continue to do it while using your newfound extra income to pay down your mortgage.
The same goes for birthday money, gifts, etc. that you may receive. Instead of spending it or even saving it, put it toward your mortgage.
Make a lump-sum payment
Check with your bank to find out if they will allow you to make a lump sum payment on your mortgage once a year. Most banks will allow you to do that. These one-time payments are applied directly to the principal of your mortgage, which can make a significant impact on length of time it will take you to pay off your mortgage.
Using these tips and tricks can help you to pay off your mortgage more quickly. They are small steps that won’t make a huge difference to your financial situation in the short term, but they will dramatically impact your financial situation in the long term.