Perhaps you have thought about paying for the mortgage on your home off early? How flexible would your finances be if you had no mortgage payment currencies going out the door every month?
Would you prefer to become debt-free and not have to be concerned about living paycheck to paycheck?
Maybe you’re skeptical and don’t think that it is that big of a deal to pay your mortgage off faster. Let us begin with an example so I can show you from a financial perspective how much you can save by paying your mortgage off early.
For instance, let’s say you buy a home and get a 30-year mortgage for $200,000 at 4.0%. If you kept the loan to the conclusion of the term, you’d have paid $143,739 in interest. This usually means the total amount you paid for your house would be $343,739.
On the other hand, if you bought the exact same home and got a 15-year mortgage rather at 3.5%, you would pay just $57,357 in interest. This is a gap of $86,382! I don’t know about you, but I am considering saving that kind of cash.
7 Simple Ways to Pay Off Your Mortgage Early
If saving that kind of cash appeals to you, read on for seven action items you can take in order to pay off your mortgage early.
1. Create a Financial Gameplan
A Financial Gameplan is a plan that will assist you to manage your cash in a way that is in accord with your life goals. Our Debt Free in 18 Months course will tell you more about what a Fiscal Gameplan is and how it is possible to create your own.
To outline the Financial Gameplan, you want to take these measures:
Make a list outlining your financial goals and what is important for you personally
Create a monthly budget list All your expenses
Take a Challenge Everything Budget, where you remove unimportant or unnecessary expenses
Stick to your budget so you are investing in line with your aims
If you find after creating your gameplan that you need more income, then choose some side hustles to bring your earnings in
Take all the excess money you have after creating your gameplan, and apply it toward principal payments in your mortgage.
2. Lower Your Mortgage Payoff Time
While you could refinance your mortgage to a lesser term, that often involves paying closing costs. Alternatively, you may pay your mortgage off by lowering your term on your own.
As an example, let’s say you have 25 years left on your 30-year mortgage. The first step would be for you to attend a site like Bankrate.com and use their mortgage calculator.
Then enter your mortgage balance and the current interest rate you’re paying. For the term, place the number of years you’ve got left in your mortgage.
Next, alter that duration to 15 years (or whatever amount of years you would like to be mortgage-free in). This will let you know what size payments you want to make to cover the mortgage off in 15 years.
Pick out the difference in your current payment and the recently calculated payment, and also make that amount as an additional principal payment each month.
It’s crucial that you specify at the bank that the payment ought to be created as an additional principal payment. If you don’t, the lender may apply the extra payments toward monthly payments.
If they do this, it will negatively affect the interest savings you could make by paying off the mortgage.
By taking these measures, you lower the duration on your mortgage yourself with extra principal payments.
3. Refinance to a diminished Fixed Term or Rate
We talked about figuring out how to pay your mortgage off early on your own. Nonetheless, in some cases, it’s wise if you refinance to a lower term.
To clarify, let’s say you now have a 30-year mortgage at a rate of interest over 5 percent. Under these circumstances, you need to consider refinancing to a 15-year fixed.
Refinancing can save you a few million dollars a year in interest just by making this move. Here’s an illustration:
For simplicity’s sake, let us look at an instance where you’re only refinancing to lower your interest rate. You’ve only got 15 years left in your mortgage, with a balance of $200,000. Should you pay the mortgage on time, you’ll pay $94,150 in interest.
By comparison, if you refinance to a different 15-year mortgage at a rate of 3.5% (current average national rate as of May 2019), you’ll just pay $57,357 in interest.
And if you make extra principal payments to receive it paid down earlier, you will save a lot more.
Compare today’s interest rates with your present speed using a mortgage calculator.
4. Make One Extra Payment Per Year
Another simple way to pay your mortgage off early is to make one extra principal payment per year which equals your monthly payment.
If you do this for the entirety of their mortgage loan using the $200,000, then 30-year loan example above, you’ll repay your loan three decades and ten months early. And you’ll save $20,000 in interest.
5. Use Unexpected Money to Pay Down Your Mortgage
Another way to get that mortgage faster would be to commit to putting all extra or”unexpected” money toward principal payments in your mortgage.
As an example, you know that tax return you buy every year? Rather than using it to treat yourself for a vacation or new electronic gadget, place it as a primary payment on your mortgage.
Some other cases of unanticipated money you could use to pay your mortgage off fast include:
- Work bonuses
- Annual increases (put the gap between your old paycheck and new paycheck amount into a savings account to pay down your mortgage)
- Money birthday and other gifts
- The money you get from returning things you bought
- Inheritance money
- Overtime pay at work
- Coins and small invoices you get when you pay money for things
- No matter the form of sudden money, just sock it away once you get it done. Commit that you won’t spend it, but rather will use it to put toward mortgage payoff.
Another choice? Utilize a program like Digit that will automatically put pieces of extra cash from the checking account to a savings account. Then you can use that money toward added payments on your mortgage.
6. Rent Out Space in Your Home
Do you have an extra bedroom in your house? Why don’t you use it to make some money and make that mortgage paid off?
My friends Steve and Annette make an average of $1,500 every month by renting out bedrooms on Airbnb. People like to utilize Airbnb instead of hotels when they travel.
Staying in a house is often cheaper as it is to stay at a resort, and it’s a cozier place for travelers to remain. Some travelers enjoy the feeling of”home” that comes with staying at a person’s home.
If you were able to earn a few hundred dollars a month on Airbnb, you can repay your mortgage much quicker.
7. Get a Side Hustle
One surefire method to locate some extra money is to start a side hustle or two. A side hustle is merely a brief or long-term gig that will help you earn more cash.
There are dozens of unwanted hustles you can use to Earn Money, but here are a few examples:
- Be a rideshare driver with Uber or Lyft
- Work as a virtual assistant
- Get a job as a server at a restaurant
- Mow lawns
- Work as a caregiver for children, animals or the elderly by advertising your services on Care.com
- Get paid to perform little handyperson jobs near you through TaskRabbit
- Locate gigs on Craigslist
- Do Home or office cleaning for businesses or homes near you
- Function for a website designer
- Help people organize their homes or offices
- The listing of side hustles you can do really is infinite. Figure out a side hustle that will work for you by making a list of your skills and talents.
Bonus: You never know when a side hustle will become a full-time money-making venture. I began a side hustle as a freelance writer six decades back.
I make thousands of dollars each year working part-time from home. It allows me to encourage my four children on my own in a comfortable manner, yet still be at home together.
There are several ways to pay down your mortgage early. It is possible to focus on one of the ways mentioned previously or perform a number of these together to get super fast mortgage payoff.
Do you have a strategy to pay down your mortgage early? What can it be?
Don’t hesitate to talk about your ideas in the comments section on our Facebook page.