Buying a house is exciting, and paying off your mortgage is even better.
Of all the homeowners in 2015, just over one-quarter of them don’t have to make payments on their home. This means that nearly three-quarters of all homeowners are still working toward paying off their mortgage.
There are several ways to chip away at your mortgage faster so you can get closer to being free and clear and enjoying the freedom of having no mortgage.
But before hurrying to pay off your mortgage, check to see if you will be charged a penalty for paying it off early. Many mortgages will include a fee if you pay off your mortgage early. However, paying it off early could prove to be a better decision than waiting it out for some homeowners.
Some loans entail pre-payment penalties during the first years – the years that you pay the most interest and the lender makes the most money. Many state laws limit the amount or length of these penalties. Your original loan documents should disclose those fees.
If this doesn’t apply to your mortgage or if it makes sense for you to pay off your mortgage early, then here are five tips on how to pay off your mortgage faster.
Make extra money
If you can get some overtime at your job or take on a part-time job for a while without increasing your expenses, that extra money can go straight to your principal on your mortgage. And when you get bonuses or extra sales commissions, designate the extra money to go directly toward your mortgage.
Make extra payments
There are several ways to do this. You can make an extra house payment each quarter; round up your payments each month; or make bi-weekly payments instead of monthly payments. Doing the automatic bi-weekly payments, set up by your lender or bank or yourself, is easy because you don’t have to worry about it.
There are plenty of consignment shops and online businesses where you can sell your furniture, clothing, designer bags and shoes, collectibles and more. Even a garage sale can bring in profits without any overhead. Do you have old jewelry – especially gold and diamonds? Those can bring in a hefty sum.
Don’t just rely on the big names such as Craigslist and eBay. Google all the other new sales sites helping people sell their stuff to people that want it. Some sites such as Tradesy have special perks such as providing shipping kits. Almost all of your unused items can help pay off your mortgage.
Use tax refund as extra payment
Many people get sizable tax returns each year, and some of those returns could come from tax deductions for paying off your mortgage. This money can easily go toward paying off your loan. After paying off your home, your tax return money can go toward the things you always wanted to buy.
It’s true that refinancing may not necessarily help you pay off your home faster. However, it can make your monthly payments significantly smaller, and that can lead to lower monthly payments.
The lower your monthly payments get, the easier it will be on your budget. You can then use that extra money to pay off your principal which would go toward paying off your mortgage sooner. With rates near their lowest levels of 2016, there’s a chance that you can save by refinancing.
Prioritize your budget
Paying off your mortgage early because you budgeted well can save you a decent amount of money down the road. There are many ways to shift your spending habits to save that extra money to pay off the mortgage. For instance, shop at the discount grocery store or make your own coffee each morning instead of stopping by your favorite coffee shop.
Whatever you purchase, it can be less expensive with promo codes or coupons. Second-hand stores are all over the place, too, offering great deals on clothing, furniture, technology products and more.
All your efforts to save money on your budget will help you have the extra money to diligently pay off your mortgage early. How fast you can pay it off depends on the amount of your loan, how long you have left on it and how much you prioritize putting money toward the principal.
Paying off a mortgage early allows you to save extra money, possibly make investments, go on a vacation, add to your retirement plan or just relax because you don’t have that monthly payment anymore.