Pay Off Mortgage Faster

Pay Off Your Mortgage Faster

As a homeowner, you might find yourself imagining a future free of regular mortgage payments. While there are a number of ways to pay off your mortgage faster, it’s important to consider not only how you can achieve this, but should you.

 

Even if you have extra income that could be put towards paying off your mortgage early, if you’re one of the following types of homeowners, doing so isn’t advisable:

  • Homeowners with low mortgage rates: If you’re a homeowner with low mortgage rates, your money might be better suited towards investment in retirement savings like a Roth IRA or 401k, both of which could provide you with a higher return than paying off your mortgage.
  • Need-based financial aid applicants: If you’re a parent applying for need-based financial aid for your child’s education, you might want to hold off on that early payment. Home equity may negatively affect your eligibility, as many institutions factor it into your total finances.

Ways to Pay Off Your Mortgage Faster

refinance

Refinancing

If you can meet all loan qualifications, afford higher monthly payments and cover additional closings costs, refinancing into a mortgage with a shorter loan term and lower interest rates is a great way to pay off your mortgage faster. For example, you could refinance from a 30-year fixed-rate mortgage into a 15-year fixed conventional, VA or FHA loan with a lower interest rate and pay off the mortgage much sooner while saving money.

monthly-payment

Increased Monthly Payments

By contributing a bit extra to your monthly payments, you can pay off your mortgage faster and potentially save on interest. It’s essential that you consult with your lender first to establish the best way to make these increased payments and ensure that your additional contributions will be properly applied to the loan.

annual

Extra Annual Payments

Instead of paying extra on a monthly basis, if you contribute one or more yearly payments to your mortgage you will still pay it off sooner and cut down on total interest paid. Again, it’s important to talk to your mortgage servicer and have them approve any additional payments.

income

Non-Essential Income

Sometimes homeowners end up with extra income in the form of a tax return or yearly bonus or even an unexpected gain such as an inheritance or lottery win. If you don’t need this money for more pressing, essential costs, you can put it towards your mortgage and pay it off faster. However, it’s crucial to approach this situation thoughtfully and make sure that there isn’t a more important or effective way to use your new money.

Find your mortgage match today!