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How To Pay Off Your Mortgage Early
When getting a mortgage, most people do not think about all the difficulties they might face when they have to pay it off. Paying off your mortgage can be difficult, and it takes people several years to finally pay it off. By then, they are absolutely drained, and the interest increases significantly.
To prevent this from happening, it is best if you pay off your mortgage as early as possible. It may seem impossible for you to pay it off soon, but if you use the ways we suggest, you just might be able to pay off your mortgage in a couple of years. Let’s discuss all the ways you can pay off your mortgage early.
#1 Get A Home That Fits Your Budget
When financing your home, do not go out of budget. It can be very tempting to go out of budget and get a better house, but that is only going to be a bother for you in the longer run. If you think about buying a home that is far beyond your budget, you must stop yourself then and there.
To prevent this uneasy situation, you must instruct your real estate agent to show you homes that fit within your budget. It is even better if you are able to find a home that is below the budget you have set for yourself.
#2 Familiarize Yourself With Mortgage Points
Many people are unaware of the concept. Lenders provide customers with loan rates and mortgage points. The points depict the loan that you would have to pay. For instance, one single point will equalize 1 percent of the total loan. You can find two types of points:
The origination fee is basically the lender covering up the cost of coming up with the loan.
The discount is the amount of prepaid interest on the mortgage. If you pay a higher prepaid interest, you will get a lower interest rate.
These points can help you save a great deal of money by saving up on the interest. You can use the interest you save to pay off the actual amount of the mortgage.
#3 Stay On Top Of Calculations
To pay off the mortgage, you need to do the right calculations and stay on top of them. For example, you must first calculate how much money you should pay monthly or bi-weekly if you wish to pay off your loan within 5 years. If you are not good with numbers you can ask the mortgage company to do the calculations for you.
Once you can visualize the exact number you need to pay off monthly or bi-weekly, it will be easier for you to come up with the installations. Keep a track of all your installments, so that you know when and how much you need to make each time.
#4 Pay Off Your Mortgage First
With your mortgage, you might have other loans you want to pay off too. In this situation, it is best to get rid of the most expensive loan first. Your mortgage is probably the most expensive loan for you to pay off. If you put off your mortgage to pay off other loans first, the interest on your mortgage might increase significantly.
To prevent your interest from accumulating, it is best to pay off your mortgage first. Other loans might include student loans, they are not as expensive, and the interest on them won’t amount to much.
#5 Refinance Your Mortgage
Refinancing your mortgage is an option not many people go for. It basically means to give up your old mortgage and get a new one. This might seem like a foolish idea to you but, it is actually great for your mortgage.
Refinancing your mortgage will help you pay off your loan early and save up on interest. The new loan will come with a shorter deadline and a new payment schedule that might help you make the payments quickly.
Here is a video that goes into this a bit more:
#6 Pitch In Extra Money
You might have more than one source of income or might have some inheritance coming your way. Instead of wasting that money, you can put it into your mortgage fund. Your monthly payments might not be enough, and you need to squeeze off as much money as you possibly can.
To do that you must make sure that any money that comes to you is put into your mortgage funds. You can even start a side business and put all its earning towards your mortgage. Every single dollar counts!
#7 Round Off To The Highest Value
This is a small trick that might help you pay off your loan sooner than you anticipate. Whenever you calculate the amount you need to pay off, you must make sure that you round the amount to the highest value. For instance, if you have to pay $756 dollars for your mortgage every month, it is a good idea to round it off to $800 so that you trick yourself into paying more money and getting rid of the loan quicker.
Each time you make an installment you will be paying a little bit more money, and that will only add up to your mortgage.
#8 Increase The Frequency Of Payments
If you find it difficult to make a big payment every month, you can divide the payment into bi-weekly installments. That way you will easily be able to pay off your installments without it becoming a bother.
There are many people who get paid bi-weekly, and if they are able to separate their mortgage payments early on, it might be easier for them to pay off their loans faster. This way you won’t even waste money and prolong your installments.
#9 Control Your Expenses
Gathering money for your mortgage is very important. To gather the money you will have to cut down on your expenditures. You shouldn’t waste money on things that are not a necessity and can wait. Frugality is a much-needed quality here.
If you are frugal in your lifestyle, you might be able to save up enough money to pay of your loan much faster than you anticipate. Only buy things that are absolutely necessary. You do not have to do this for the rest of your life, but until your mortgage is paid off, it is a good idea to stay frugal.
Here is a great article to help you understand good money habits when buying a home:
Best Time to Buy a Home & Good Money Habits to Stay Debt Free
#10 Think About Renting
Do you think that there is a room or a portion of your home that you can rent out? If that is the case, then it is a very good idea. Renting out your property will surely help you gather the money you need to pay off your loans.
It is a steady income that can go into your mortgage completely. Find goods renters, and you will be able to pay off your mortgage in no time.
Prolonging your mortgage is not feasible. It may seem like the easy way out, but prolonging your mortgage is only going to bleed your pockets dry. You will only have to pay a larger sum of interest. This is why you must strive and pay off your loan as soon as you possibly can.