Buying a home is a dream most of us harbor as adults. Being a home owner signifies success and freedom as a result of having taken our responsibilities seriously and created a life that supports home ownership.
There are drawbacks, however, especially if we buy more home than we can afford long-term, and find ourselves unable to make other investments that allow for early retirement due to having all our income tied up in mortgage payments.
The solution is to own our home outright by paying off the mortgage as quickly as possible. This can be a tough uphill battle initially. However 7 expert tips below provide ways to pay off your mortgage faster than ever.
1- Make Bi-Weekly Payments
Consider submitting half the monthly payment to your lender every two weeks instead of the typical monthly payment. This reduces the interest because owed substantially over the life of the mortgage. You effectively make an extra payment due to having made 26 yearly payments instead of the customary 24. Doing this for the duration of the loan shaves off several months from the contract and reduces interest paid over the time of the loan.
Please note – Discuss this with the lender first before making bi-weekly payments since you might be penalized for the extra payments or paying off the loan balance early.
2- Round Up Payments
Rounding up your payments is an easy way to pay extra without missing the funds. Like bi-weekly payments, you won’t need extra funds to remove a few months off the loan term.
You may also go a step further and add an extra $50 or $100 per month to your payments. This adds up to a significant amount over time, which effectively saves you money on interest while reducing the term of the loan.
3- Find Extra Money
Find freelance work or sell something on or offline. Small amounts like $20 here and $12 there might not seem like a lot from the start, but they stack up. Having a small part-time job on the side that pays extra will over the course of a year make you a significant extra sum that you can put towards the loan payment.
4- Make One Extra Payment
You can achieve the same result (if you don’t have the cash flow to commit to bi-weekly payments) by making one extra payment every year. Use money from a tax refund or bonus from work to assist the loan payment. You can also divide your monthly payment by 12 and add this amount to all future monthly payments.
5- Refinance Your Loan
Known as one of the easiest ways to reduce your payment and save interest while paying off your loan in half the time. Many local banks and credit unions offer low interest rates on mortgage loans. If you see a lower home loan interest option, then consider refinancing your loan with it.
6- Take Advantage of Paperless
Additional discounts are sometimes offered when you sign up for auto-payments or paperless statements. It saves the lender money because they don’t have to follow up with paper billing while also creating a seamless payment experience, leading to timely payments.
7- Choose the right loan provider
This technique is easily the best way one to avoid incurring large debt due to high interest rates and excessive fees offered by some lending institutions. When you bank with Newcastle Permanent for instance, you get the lowest rates available to new homeowners and even property investors because they are 100% owned by members, which allows them to provide market-leading personal & business banking products, home loans & credit cards.
The bottom line is that faster loan payment will save you money in interest while lessening the overall loan term. Just think of what you could do with all your savings – better retirement, home improvements, paying off debts, etc.
There are a plethora of benefits to paying off your home loan early, but the biggest is less debt to worry about. Who wants to be a slave to the lender, right? How about you, what techniques do you know for avoiding debt and paying off home loans faster?
Shift Frequency © 2019 – Educational material