How To Pay Off Your Mortgage Ahead Of Schedule
When you close on your new home and have signed on the dotted line committing to a 30 year or similar loan term it can feel a bit daunting. While you are committed to paying it off, you aren’t forced to stay with that mortgage for that long. Other than of course selling your home for a move, there are other ways you can work with your mortgage to shorten the length of its term. If you are in a position where you have a healthy surplus of cash flow and a shorter term works better for your long term goals, then here are a bunch of considerations.
Instead of paying your mortgage once a month on the first, try paying half of it every 2 weeks. By doing this you will end up making 1 extra payment at the end of the year which can typically shave roughly 5 years off the life of your loan. Just check with your bank to make sure they accept this type of payment strategy.
One extra annual payment
Similar to the outcome as the previous idea, instead of the biweekly payments try making just 1 extra payment per year. Depending on how you receive your income or maybe if you typically get a good tax return this may be easier to handle.
Add to principal
Perhaps one of the more common practices is to pay more each month towards your principal. Many banks will even have this option on their payment coupons for those who wish to take advantage of this. Be sure your bank offers this as well without penalty before you begin.
Lump sum principal payment
This option is another one that is great if your income supports it well. Some receive work bonuses at the end of the year for example where taking a portion and putting it towards your mortgage can help you save in the long run.
This option would be really trading one mortgage for another, however, if you can get a much lower interest rate then you will absolutely save a lot of money in the long run.
Shorter term mortgage
This goes hand-in-hand with refinancing where you want to match up what you can comfortably afford with your future goals. Retirement is often a milestone where homeowners want to either move to downsize or remain in their home mortgage free.