This is one of the questions that many people ask. There are reasons that people want to pay their debt early because this could help them to save a lot of money in that they have to pay in the form of interest. Have you ever thought of paying it early? Have your ever thought about your financial picture, if you do not have to pay any debt? How beautiful will it be when you do not have to pay any kind of loan repayment?
There are many benefits of paying your mortgage early and it can bring a lot of peace of mind when you are debt free or buy a house without a mortgage. You can have more money to save, you can invest more and you can start a new business. If you think that paying off debt early cannot help you then let me give you an example, if you have taken a mortgage of amount $150,000 for a time period of 30 years at an interest rate of 4.2% and you are paying it monthly then if you complete that in 30 years, you would have paid $114,069 in debt that makes the total amount $265,069. Suppose you took the same mortgage for a time period of 15 years with an interest rate of 4.0% and paid it in 15 years than at the end of 15 years you would have paid $49,715 in debt. Thus you can save an amount of $64,354 if you pay it off early. It is a huge amount if you can save it. So let’s start, so that we could pay off the mortgage early,
1. Make your Plan
The first thing you need to do is to make your plan, you cannot travel to a destination if you do not know the way. So the first thing you need to do is to set your goals, make your plans so that it could be easy for you. By making a financial plan, you will in line your expenses with your future goals and you will be able to save more money this way. You need to mark your financial goals and write down what are the important things that you want achieve that is basically that you want to pay your mortgage early. After that you will have to create a budget and track your expenses. You will have to make a challenge everything budget to put the maximum money for your mortgage monthly payment. Try to eradicate your expenses as much as you can, so that you could save the maximum amount for your mortgage amount also try to stick to your budget so that you do not face any difficulties.
Try to find extra income source and put all your money to pay your mortgage. This will help you to save more in future.
2. Refinance your Mortgage
One of the best way to pay your loan of any type is to refinance that loan. By refinancing, you can get a lower interest rate than the one you are already paying and you can also have a lower monthly payment than the previous one. Refinancing is sometimes not recommended but I would say that it can help you a lot even if you have less time remaining to pay the mortgage.
If you are paying your mortgage on a high interest rate and you got 10 to 15 years remaining to pay the loan then you should consider refinancing you mortgage to a lower fixed rate because this would help you to save some thousand dollars in a year. A simple step saving some thousand dollars is worthy at all. Let me give you an example, suppose you have to pay $150,000 in 10 years at a rate of 5.0% and you refinance it to a lower rate of 3.5%, in this case, you would simply save $12,923 for the time period of 15 years.
So refinancing is worthy and you should compare the rates of your lenders with other companies to find a lower rate.
3. Additional Principal Payment
If you want to pay your debt fast, then is one of the important step to take. When you will pay extra amount of money every month on your mortgage then this would help you to reduce the payoff time. To calculate the extra payment you need to pay to reduce the time you can use online mortgage calculators. Go to a website you like and then find the mortgage calculator, on that page put your mortgage details and your monthly payments with the left amount. After that put the same information with a lower time period, this will tell you the difference between the interest amount that you will have to pay and it will also tell you about the principal payment that you need to make to pay it early.
So add the saved money from your budget in to your principal payment and pay more money in the form of principal payment so that you could save the interest money. Make sure you tell your bank to put the money as an additional principal payment because sometimes they add it as a future payments that is not useful for your goal. Thus paying an extra amount every month will help you to pay off the loan earlier. Refinancing your mortgage will require some hard work to be done by you and you will have to go through some companies but taking this step will help you to overcome it.
4. Make an Extra Payment
Another simple step that you can take to pay off your mortgage early is that you should make an extra payment every 6 month that would be equal to your principal monthly payment. By this you will pay 2 extra payments in the year and if you have a mortgage of 20 years then you would pay it off in 17 years and 2 months and by this you will also save almost 3 years of interest money payments too. This is an simple step that you can help you to lost almost 3 years along with other steps, you can make a great change.
5. Increase your Income
This is one of the most important step to take if you are facing any financial issues. If you cannot make enough money to pay your mortgage money and if you want to increase the amount of money you pay monthly then you should try to increase your income. There are many side hustle ideas that you can use and bring in extra money every month. There are many side hustles from which you can choose from and one of the best thing about them is that you can work according to your convenience.
For Example, you can work as a virtual assistant, you can mow lawns, deliver pizzas, deliver groceries, become a handy person on Task Rabbit, become a server at a restaurant, drive with Uber or Lyft, deliver products with doordash or Amazon, become a baby sitter or a pet sitter, you can also walk dogs and you can also freelance your skills to earn more money. Apart from all these ideas, you can also offer your service to people. Hence the list of jobs is endless and you can take the one that suits you the best.
If you do not to go into jobs and you have extra space in your home then you can earn money by renting you space out on AirBnb. This site will help you find potential customers that are looking for a place to live cheaper than the traditional hotels. So you can also make a good deal from it.
6. Use Unexpected Money to Pay Mortgage
This is one of the steps that are mandatory if you want to pay off your mortgage earlier. By unexpected income I mean to say that any income that you did not knew about. For example, if you get a bonus from your employer or if you get a tax return from your government, then you should use this amount to pay off your mortgage. You should put all the amount in the principal payment that month so that you could pay more and end it quickly. Your unexpected money may also include your annual raise, because you can easily make a living in the amount of money that you were getting and you can put the raised income in to mortgage principal payments. Apart from these, your gifts, the cash you receive in the form of gift, inheritance money, overtime money and any other cash that you forget are considered in unexpected money and you should put this amount in to your principal mortgage payment.
So these were some of the ideas through which you can pay your mortgage earlier. By using more than one idea at a time, you can make a good deal. Do comment in the section below and let us know if you have any queries regarding the article because we would love to hear from you.