Everyone dreams of the day that their mortgage for their house will be paid off right? I know I do! We bought our house around 3 years ago, and would like to have it paid off in around 4 to 5 years. We have a long 30-year loan though.
There are many reasons why people want to pay off their homes early. Maybe you just hate debt and want all of your debt to be gone. Maybe you want to retire and lower your spending so that you are more prepared.
However, I do know that not everyone is in a rush to pay off their mortgages early. Your mortgage rate might be extremely low and you might be earning a much higher return in the stock market or in your other investments, which would persuade you to invest and throw your money at your investments instead of your house.
How is it possible that we can pay off our house so much earlier than the planned 30-year loan that we have? There are many reasons for this, mainly because of the fact that we plan on paying extra large payments to our mortgage debt soon. Our goal is to make a couple thousand dollars extra towards our payments every month, and we also hope to switch our payments to biweekly if our bank allows for it.
1. Increase your payment amounts.
This one is a no brainer. If you throw more money towards your debts, then of course you can pay your mortgage off more quickly!
Another way is to make more payments towards your debt. Did you receive a bonus for the holidays, signing on with a company, or for some other reason? Put that extra money towards your debt and make a new payment!
Even if you can’t put a large amount of extra money towards your mortgage payment, even a little bit helps if it is put towards your principal. That way you are not being charged all of that extra interest anymore.
2. Increase the amount of payments that you make.
As stated above, try and apply any extra money towards your mortgage. Everything counts and one extra payment is worth it.
This also goes hand in hand with making bi-weekly payments. With biweekly payments, you make a payment every 2 weeks. There are 52 weeks in a year, so instead of making 12 payments in one year, you are making 13 payments.
You are also shaving a little off interest as well. Not all banks will allow you to do this though, so first ask your bank. You might have to sign up for some sort of biweekly plan with them.
With paying your mortgage biweekly, you will most likely be able to shave AT LEAST a couple of years off your mortgage, and it’s really just that simple!
3. Refinance your mortgage.
Mortgage rates are extremely low right now, and everyone knows that. My friends don’t have the greatest credit in the world (they don’t have a car payment or credit cards, so they haven’t been able to build their credit the normal way), but still received a 30-year loan at what I believe was a 3.2%. That is great! Our mortgage is at 5%. We should refinance.
Refinancing your mortgage might cost a couple thousand up front, but in the end, if you can slash more than 1.5% to 2% off your rate, then it is probably worth it to refinance your mortgage.
Do you plan on paying off your mortgage early? Why or why not?