If you’re like many homeowners, you’re paying down your mortgage loan with any extra cash you can squirrel away. And because home values have risen over the past several years, it may seem like the duration it takes to repay your mortgage in full is too long. But while it may take many years, here are some strategies for slashing the amount of time it takes you to get out from under that mortgage obligation.
- Make two payments every month: Split your mortgage payment in half and pay every other week. By making bi-weekly payments, you’ll shorten the life of your loan by four to six years, depending on your interest rate. It’s a great way to pay off your home faster.
- Budget for an additional payment every year: Plan for an additional payment every year so you can pay off your home loan a lot faster. If you don’t want to worry about making payments twice a month to the lender, you can get similar savings by making an additional payment at least once a year. A bonus, cash gift, or tax refund may provide you with the cash to cover this payment.
- Pay money toward your principal: When you can’t afford to make an additional payment toward your mortgage every year, it makes sense to pay a little more each month toward the principal. This can lower the time it takes to pay off your mortgage by months or even years. Just make sure that you first contact your lender to confirm how they handle those types of payments.
- Refinance your mortgage: Mortgage refinancing allows homeowners to pay off their mortgage faster and even enjoy lower monthly payments. Refinancing can also mean that your cash outlay is less over the entire term of the loan. With the market still volatile, you can also use refinancing to save money on interest rates, which may go up again in the future.
- Opt for a mortgage with a flexible term: A shorter amortization length means less money—and fewer years—spent on interest. While 15- and 30-year mortgages are usually two of the most common options offered by lenders, they are not the only choice. Inquire whether your lender is willing to offer you a 20- or 25-year term.
