Your home is probably your largest investment and your biggest accomplishment. Paying it off should be a priority. For many people, their home is their key to financial security. Paying off your mortgage early can also save you money in interest charges, putting you in a better long-term financial position. If you’re interested in paying off your mortgage sooner, check out these 5 tips:
#1 Make bi-weekly payments
Instead of paying 12 times per year, pay bi-weekly and make a total of 26 payments each year. By year’s, you’ll have made 12 extra payments on your mortgage and be that much closer to paying it off. You’ll also save on interest over the long run. For example, a $300,000 home paid monthly with a 3 percent interest rate will cost over $125,000 in interest over 25 years. If you make bi-weekly payments, you’ll shave 3 years off the amortization schedule and save over $16,000 in interest.
#2 Round up your payments
Rounding up your payments can be a simple and painless way to pay your mortgage off faster. If you do this on top of making bi-weekly payments, your savings will really add up. Rounding up won’t make a big difference in your monthly budget, but it will certainly make a big difference in paying off your mortgage sooner.
#3 Put bonuses and gifts towards your mortgage payments
Whenever you get an unexpected lump of money, put it towards your mortgage. For example, a birthday gift, a one-time work bonus or a cash prize can be applied to your mortgage without impacting your budget. Many homeowners put tax refunds towards their mortgage principal as well.
#4 Give your mortgage an annual gift
Many banks will only allow borrowers to make one extra payment each year. Take advantage by saving all of your extra money and making an annual gift to your mortgage on the anniversary. Even a small gift will help in the long run as long as it is deducted from the principal directly.
#5 Keep up-to-date on the market
It’s easy to set up automatic payments and just forget about your mortgage, but keeping yourself informed can save you money. Stay up to date on mortgage rates, options and what’s happening in the market. You can often save money just by knowing what your options are.
Paying off your mortgage early will mean less interest paid over the life of the loan and a shorter mortgage length. However, make sure you aren’t paying off your mortgage early at the expense of other obligations, like credit cards, savings accounts or retirement. If you can pay more on your mortgage without sacrificing other financial obligations, paying more now can save you a ton of money in the future.