4 EASY TIPS TO PAY OFF YOUR MORTGAGE FASTER
Congratulations! You are officially a homeowner and made a huge investment in your future. Instead of paying your landlord’s mortgage every month, you are now spending your hard-earned money on YOUR mortgage payments while building equity. One way to get the best possible outcome of your investment is to pay off your mortgage as early as you possibly can. If you follow these four simple tips, the interest on the loan may decrease, and your amortization term will also decrease. This means more money in your pocket. Yay!
Below are 4 easy tips to help pay off your mortgage sooner.
Make Bi-Weekly Payments
Do you currently pay your mortgage payments monthly? Consider making them bi-weekly instead! Bi-weekly payments mean payments every two weeks, instead of once a month. Because a normal calendar year is 52 weeks, making payments every 2 weeks will mean that you’d make 26 payments every year, therefore paying more of your principal than if you only made 12 larger payments in a year.
This is because there would be two months that you’d make three mortgage payments in the month, allowing two extra bi-weekly payments to be made in the year.
For example, say you have a $300,000 mortgage with a 3% interest rate. On an accelerated bi-weekly payment schedule, you could save around $16,000 in interest and could cut your amortization schedule down by almost 3 years!
Round Up Your Payments
Did you know that rounding up your mortgage payments could shave years off your amortization schedule? For example, if your bi-weekly mortgage payments are $480, consider rounding up your payments to $500 which is a difference of only $20. If you’re able to do this, your bank account will hardly notice the small additional amount, while shaving years off your amortization schedule.
Just make sure this additional amount is going towards your principal and not your next mortgage payment.
Make Lump-Sum Payments
Do you have some padding in your savings that could be put towards your mortgage? Did you recently get a bonus a work? Or perhaps you just got your tax refund back? Depending on the terms you agreed with your lender, it is common to have a mortgage that allows you to pay one lump-sum payment every year towards the principal of your mortgage. This yearly lump-sum payment is normally allowed based on a fixed percentage of your mortgage. For example, some lenders allow as much as a 20% lump-sum payment towards the principal of your mortgage once a year (normally on the anniversary of your mortgage). This payment would go directly to the principal amount of your mortgage, which could in turn lower your payments and/or amortization schedule, therefore saving you money on interest.
Before doing this though, be aware that mortgage terms vary depending on the lender. If your lender does not allow lump-sum payments, you may end up paying a penalty if you wish to put make one.
Never stop shopping!
When was the last time your bank called you to tell you that you were paying too much on your loan? Or your cell phone and internet provider calling to tell you that there was a better rate available that included everything you currently have? The answer is probably never.
We understand that a home is a huge purchase, and we want to be in your corner. That is why Ownest monitors your mortgage monthly. If a better mortgage product becomes available that will save you money, you will instantly get notified. That means that we are shopping around for better rates and products for you constantly, because we see our relationship as long lasting and will continue to be in your corner after you purchase your home.