Even if you got your home at a great price and had a very large down payment, it might take decades to pay off your mortgage. Depending on your interest rates over the years, a longer mortgage could potentially waste tens of thousands of dollars. These five tips will help you pay off your mortgage as quickly as possible to free up your finances and cut back on your monthly expenses.
Switch to Biweekly Payments
Biweekly payments have a few advantages over monthly payments including being able to pay off your mortgage quicker. Your monthly expenses won’t change by much, but you will be able to squeeze in one extra mortgage payment every single year. Bi-weekly payments can also make budgeting easier by reducing how much is coming out of each paycheck.
Use Your Bonuses
Spending the extra money on yourself or your family is going to be tempting, and that is why you should plan on putting all unexpected income toward your mortgage. Once you have budgeted out all of your expenses, you won’t have to rely on bonuses to pay your bills or take that second vacation. Using annual bonuses to pay off your home loan could help you shave a few months off of your mortgage every year.
Cut Out One Non-Essential
If your final goal is to be debt-free, then you might need to make some hard decisions regarding frivolous spending. Sacrificing one small non-essential could free up hundreds of dollars a month, and that will end up saving you thousands on your interest rates over the years. Some common non-essentials that you might want to consider giving up include gourmet coffee, soda, eating out at restaurants every week, or heading to the movies on the weekends.
Round Up Your Payments
Many people have their mortgage payments directly debited from one of their accounts, and that makes it very easy to round those payments up. Not only will that help you reduce the total length of your mortgage, but it might also look good on your credit report. Paying slightly more than the minimum can increase your credit score, and that will open up new options for refinancing.
Rent a Room
The idea of renting out a room in your home might seem unusual, but it could increase your monthly income by quite a bit. You even have the option of creating a separate living unit so that you don’t have to interact with your tenants. Another benefit of creating a separate living space is that the renovations will most likely increase the value of your home as well. You might want to consult a realtor from a company like Foxfire Realty, Inc. for more information about this.
As our home loan grows smaller, you should also take a fresh look at your interest rates every few months. Your bank or lending institution might be willing to refinance your loan and lower your interest rates as long as your payment history remains consistent. While you are refinancing your loan, you need to make sure that the loan officer doesn’t add a prepayment penalty or any other unusual stipulations that could end up costing you money.
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About the Author:
“This article was written by Dixie Somers. Dixie is the proud mother of three girls and wife to a wonderful husband. She is a part-time blogger and freelance writer, and she enjoys writing for several niches, including business, family, and finance.”
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