Today I am talking about, how to pay your mortgage off early. Do you think it’s possible to pay your mortgage off early without paying a big lump sum? I’m going to talk about seven ways that can help you to pay off your mortgage early.
Number one, make one extra payment a year on your mortgage. For example, if you have a $200,000 loan and a 30-year mortgage at five percent interest rate, if you make 13 monthly payments instead of 12, your loan will be paid off in 26 years instead of 30 years , saving you 32, 699 in just four years. That’s a lot of money in four years, right??
Number two, if you switch to bi-weekly payments that will help take six more years off of your loan. If you have a new mortgage, you want to make your first payment, and then call your lender or your mortgage company to set up this type of payment system for the bi-weekly and just a tip there may be a one-time setup fee to change that to bi-weekly.
Number three, refinance to a lower interest rate. This one probably seems like a no-brainer. Of course you know we always hear about
lower interest rates and certainly if there’s a lower interest rate it may make sense for you to refinance and lower your interest rate. However, you know that just because there’s a lower interest rate you have to remind yourself if you have had your loan already for 10 years and you’re going to refinance to a 30-year mortgage you are now starting over.
Number four, shorten your loans term. What I mean by that is say you have a 30-year mortgage and you refinance it to a 15-year mortgage, that 15-year mortgage is obviously going to cut down on your time, but how much money is it saving you? Let’s say you had a mortgage, a 30-year term mortgage at a 6% interest rate your loan amount was $200,000 and you’ve been paying that loan for about five years now, if you refinance to a 15-year mortgage at a rate of say two point eight seven percent, your payment’s would increase about a little bit close to $80 per month. Yes you are paying a little bit more per month, but again you are going to pay off your loan faster and you’re actually going to save money. How much money is that going to save you by switching to that 15-year mortgage? That’s going to save you about a hundred and thirty thousand dollars in interest. That’s a lot of money! One hundred and thirty thousand, what could you do with an extra one hundred and thirty thousand dollars? I can do a lot, I think!!!
Number five, rounding up your numbers every month. So say your mortgage is eight hundred and fifty-two dollars and fifteen cents, some odd amount . Make it an even number. An extra twenty to fifty dollars per month can actually cut about two years or so off of your mortgage and when you start cutting time off you are saving money.
Number six, eliminate PMI. PMI is private mortgage insurance. If you put less than 20% down or you have less than 20% on your mortgage then you will be paying PMI and that’s about another 100 to 200 dollars per month that you are paying on your loan. That extra one hundred to two hundred dollars per month could be going towards your principal and not your interest. Apply that payment directly to that principal and you will pay your mortgage off a lot sooner. If you are interested in removing at PMI you need to speak with whoever your loan is currently with or you can speak with one of my preferred lenders about doing a refinance and hopefully removing private mortgage insurance.
And finally, of course if you make a lump sum payment you will pay your mortgage off a lot sooner. Paying a lump sum of say five thousand dollars could save you ten thousand dollars so it may be worth it. I hope these tips were helpful for you and will SAVE you some MONEY!