You can get long-term and short-term mortgages, but either way, a mortgage is a commitment you must adhere to for at least a few years. The exact amount you pay depends on your contract and your mortgage type. You’ll pay towards your principal payment (the balance of your original loan) and the interest rate, which goes to the lender while your balance is still outstanding.
While a mortgage makes purchasing your dream home possible, the regular payments can feel like a burden. It’s no wonder that paying off a mortgage faster is an attractive option for many borrowers. If you’re eager to say goodbye to your mortgage sooner rather than later, keep reading.
This article shares five tips on how to pay off your mortgage faster.
Why Pay Off Your Mortgage Early?
Many homeowners wonder whether it’s best to pay off the mortgage early or keep the money and save for other things. It comes down to whatever works for you, but there are benefits to paying off your mortgage more quickly.
For starters, you’ll own your home without any debt hanging over your head. It removes the burden of making a hefty payment month after month, and you’ll have the financial freedom to start spending elsewhere. It’s an exciting time, as you can put your previous mortgage cash toward holidays, travelling, or retirement ventures. You can also use the extra room in your budget to tackle short-term debts, such as credit cards, college loans, and utility bills.
Paying off your home early is also better for your long-term financial stability. You can potentially save a lot of money by cutting out years of interest rates. Furthermore, being mortgage-free eliminates the risk of losing your home should you run into financial troubles.
5 Top Tips to Help You Pay Off Your Mortgage Faster
You can do a few things to become mortgage-free as soon as possible, from increasing your monthly mortgage payments to making more of them. Just remember to check your mortgage agreement carefully to ensure you don’t breach any rules and get penalized.
1. Raise your current payments
The first thing you can do is increase your payments. You’re already paying a set amount regularly but raising your payment will help chip away at your mortgage. It doesn’t have to be a substantial amount; even a slight increase with any extra money you have available will go a long way.
This is known as a prepayment or prepayment privilege. Not every mortgage lender offers these privileges, so always check your contract before making the transaction to avoid prepayment penalties.
2. Round up your mortgage payments
Consider rounding up if you’re wondering how much extra to pay toward your monthly mortgage payments. It’s a simple calculation allowing you to pay a little more without breaking the bank. You could round up to the next $100.00; for example, turn your $765.00 monthly payment into $800.00. And just like that, you’ve knocked a bit more off your total.
3. Speed up your payments
Instead of increasing your usual payments, you might prefer to make extra payments. Most people make monthly payments toward a mortgage, but some lenders allow you to switch to an accelerated payment option. This means you can make weekly or biweekly payments, contributing more than your monthly plan. Another bonus is that you save money on those costly interest charges.
4. Make lump-sum payments
Making a lump-sum payment, or a one-off payment, is a great way to decrease your balance. It means paying extra money outside your regular payments to pay off your mortgage faster. There might be a limit on how much you can pay and when. For example, depending on your contract, you might make a lump-sum payment each year or on specific dates during your term.
It’s something to consider if you acquire some extra money, for example, from a bonus at work or an unexpected tax refund.
5. Renew with lower interest rates
You might be able to get a lower interest rate when you renew your mortgage. While this is a good way to shrink your monthly payments, it’s also an excellent opportunity to pay off your mortgage faster. Rather than reducing your regular payment amount, keep things the same and watch your balance begin to disappear.
Bansal Team, Your Trusted Pickering REALTOR®
If you’re new to the property market and want expert advice about the home buying process, don’t hesitate to discuss your options with the Bansal Team, real estate agents in Pickering today. We will review the entire procedure with you, from obtaining pre-approval on a mortgage to assessing your accommodation requests. We also understand the importance of setting a budget that suits your unique situation to ensure the best possible financial outcome. Contact your Pickering REALTOR® today!