How to Pay Off Your Mortgage Early

How to Pay Off Your Mortgage Early

It's a great feeling knowing a debt has been fully paid off and you're no longer tied to that specific expense. So it's obvious why homeowners who are still making mortgage payments look forward to the day when their mortgage is the rear view mirror. Having a paid off home is a dream come true!

But before you start planning how to spend your newfound extra cash each month, remember that there are both right and wrong ways to go about paying off your mortgage early. This article will cover some few tips on how to pay your mortgage off early.

Increase Your Mortgage Payments

The first option for taking bigger bites out of your mortgage is increasing your mortgage payments. Adding even a small amount to your monthly bill might help you pay off your mortgage faster.

You can only increase your payments by a set yearly amount, depending on what is specified in your mortgage contract. If you try to increase them more than allowed, you might have to pay a fee. Just remember that once you boost your payments, you can't decrease them until the end of the term, which could be up to 5 years or more.

Accelerated Mortgage Payments

You may set up an accelerated payment plan to make weekly or biweekly payments. With this option, you are putting more money toward your mortgage each month. Making accelerated payments can help you save money on interest because you effectively make what amounts to an extra month's payment each year.

Lump-Sum Payments

With lump-sum payments, you are able to put down specific amounts of money towards your mortgage principal. This is a fantastic way of eating into the principal because you aren't paying interest on lump-sum payments.

In turn, this can be a great way to reduce the amount of interest you pay on your loan in the long run. Just be cognizant that you'll have a limit on how much of a lump-sum you can put down on your mortgage. And you'll pay a fee for this as well.

Shorten Your Loan Term with Refinancing

Another great option is to shorten your loan term when you refinance your home. If you have 20 years left on a 30 year mortgage, refinancing to a 15-year loan would would shave 5 years off your loan term. So, you'll have larger monthly payments but you'll end up paying less interest.

Pay it off in Cash

If you have enough cash to pay off the remainder of your debt, this could be a great alternative. This is the method that people with considerable savings when considering how to pay off their mortgage early.