Mortgages, while relatively low on the interest front, are usually our biggest source of debt. Especially in the early days of your mortgage, it pays to focus on your mortgage. Doing so could help you pay off your mortgage sooner and pay less in interest overall. Here are just a few tips to help you get ahead of your mortgage and pay it off more quickly.
1. Make an Extra Payment Every Year
Many banks and mortgage lenders allow you to make a payment every year that you can apply directly to your home’s principle. You’ll have to call your lender and make sure that this is the case. If it is, then be sure to save up some money every year to make a substantial payment. An extra $100 every month, when you consider your entire mortgage, can help cut your interest rates by a fairly substantial margin every year, so saving up, and saving up big, is always a great idea. Of course, don’t let this become your financial priority. Investing in your retirement and ensuring you have a safety net is more important than paying off your mortgage.
2. Use Your Windfalls
Christmas bonuses, inheritances, large tax returns, and other surprise sources of income can be an excellent excuse to pay off some of your mortgage principle. While there’s always a temptation to treat yourself now with these windfalls, sometimes the much better idea is to use that money to pay off your debts, and your mortgage in particular. So instead of a trip, why not give your future self more money and pay off the mortgage.
3. Request a PMI Cancellation
You’ll have to double check with your local regulations and you lender, but you can often cancel your private mortgage insurance (PMI) after you pay down 80% of the original value of the property. By getting rid of the insurance, you can stop paying the monthly fees for the PMI and instead invest that in your monthly principle payments.
4. Switch to Biweekly Payments
Months and weeks are different when it comes to the end of the year, which means monthly mortgage payments actually have one less payment than going biweekly. By paying your mortgage every two weeks, you can actually put more money down without even thinking about it. See if your mortgage provider is willing to switch your mortgage to a biweekly pay schedule and you could save thousands on interest by the end of your mortgage.
Paying off your mortgage early is an excellent way to free up cash later in life. It will mean you can do more with your money and maybe even invest in something else. The key to paying off your mortgage early is dedication. Stay vigilant and make it a priority, especially in the earlier years. That way, you can finish your mortgage sooner and end up paying less in interest. Your future self will be very pleased, indeed.