How to Pay Off Your Mortgage Faster

Real Estate
on October 9, 2013

Many homeowners today are not interested in the old home ownership model. Instead, they’re looking for a way to own a home without paying too much in interest. With this in mind, these homeowners are interested in ways to pay off their mortgage faster, saving money over the life of the loan and allowing them to enjoy their house without the stress of a mortgage. For people who want to focus on saving money, here are some ways to get out from under a mortgage more quickly.

Think about a mortgage with a shorter term.
The standard home mortgage lasts for 30 years. When most people are looking for loans, this is the default setting that they’ll be dealing with. There is no reason why you have to take on a 30-year mortgage, though. Many lenders offer 10-year, 15-year, and 20-year options. This will increase your monthly payment, as the full amount that you’re borrowing will be stretched out over a shorter period of time. You will be saving money on interest, though, and you’ll be free of the massive mortgage obligation in a shorter period of time. If you have a budget that allows for a larger monthly payment, then considering a shorter loan terms might be a smart move.

Make one extra payment each year.
Many homeowners like to save a little bit of extra money each month to make an extra mortgage payment. In the alternative, some will use their holiday bonus or perhaps any gift money that they receive during the holidays to make one extra payment each year. Though this might seem like a small thing, it can trim anywhere from three to five years off of a standard 30-year mortgage. If you’re willing to commit to saving a little bit of extra money each month, you can walk away from your mortgage earlier, saving money that would have been spent on interest.

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Bi-weekly payments eliminate additional interest.
Rather than paying the mortgage once per month, many people have switched over to a bi-weekly payment plan. This can work well for people who are paid every two weeks. It is a small change that requires individuals to make an extra payment each year, as there will be one month out of the year where the bi-weekly plan will force a person to make three payments during a month. The payment amounts will be smaller on an individual basis, but you will pay more each month and over the course of a year. This can lead to savings, as you’ll dispose of the loan a couple of years sooner.

If you’re serious about saving money, then you need to think about the most efficient ways to handle your big costs. A mortgage is the biggest cost on the plate of most people. By paying it off a little bit quicker, you can give yourself the flexibility to make additional purchases or move if you need to.

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