While some people are content making mortgage payments according to their original terms, others want to say goodbye to their home loans as soon as possible. Perhaps you want to minimize the amount of interest you have to pay or maybe you just want your house to become fully yours sooner rather than later. Whatever your reasoning, paying off your mortgage quickly is moderately difficult and requires hard work and careful budgeting. Your financial situation and regular expenses will greatly influence how quickly you are able to accomplish this goal.
Check the fine print of your mortgage contract for any provisions regarding prepayment. Some lenders consider making extra payments on a mortgage to be a breach of contract and will penalize homeowners who choose to pay their mortgages off in less than the original time they agreed to.
Analyze your finances carefully and make a list of every expense you incur on a monthly basis, from your mortgage payment to your grocery bill. Subtract your total cost of living from your income and calculate how much money you have left over. Determine how much of your expendable income you can realistically afford to add to your regular mortgage payment every month and increase your monthly payment to reflect this amount. The more money you add to your monthly payments, the faster you'll pay your mortgage off.
Request to have your regular monthly payment broken up into several, smaller payments that occur every time you get paid. Known as a payday schedule, this will double -- or even quadruple -- the number of yearly payments you make. The extra payments on your mortgage will reduce your principal balance.
Put your annual tax refund toward your mortgage. Depending on how much money you typically get back after filing, this could make a huge impact and greatly reduce the length of your repayment as each extra annual payment will be applied exclusively toward your principal balance.
Set aside extra cash throughout the year to make a double payment every quarter. Four times per year, send your lender twice the amount of your regular monthly payment to be applied toward your principal and reduce the total amount you still owe.
Apply any sudden and non-recurring additional income toward your principal. This could include annual work bonuses, lottery winning, inheritances, investments and cash gifts.
Consider refinancing your home loan. If market conditions shift and interest rates drop, take out a new loan to pay off what you still owe on your current mortgage. This will save you money on interest and increase the amount of expendable income you have to put toward your principal every month.
- Forbes: Six Simple Ways to Pay Off Your Mortgage Faster
- Wells Fargo: Pay Off Your Mortgage Sooner
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