Tips to Pay Down Your Mortgage – and Fast! Mortgages can come in handy when you’re desperate for funds to get hold of that dream property, but the overwhelming payment period and debt can turn loans into a nightmare. These tips can quicken the payment process and help you clear your conscience and “death pledge”, so you can go back to those sweet dreams.
- Refinance, refinance, refinance! Rather than taking out a30 year loan, try asking your financial institution for a 15 or20 year mortgage instead.Theseshorter term loans are amortized quicker and add your payments to principal reduction. If you don’t want or are unable to change the time frame for your mortgage payments, try refinancing with a lower interest rate during the same period. This method of refinancing will drop your monthly payments and reduce your interest during the borrowing period, but unfortunately, it can’t speed up your mortgage payment. So how can you work around this? Simple, keep making your old monthly payment after applying the lower interest rate and use the leftover money from your original payment as extra principal payment. This way, you can pay down your mortgage faster.
- Make extra payments to avoid the cons of refinancing While refinancing is seen as the ideal way to pay down your mortgage faster, the potential increase in closing costs, loss of flexibility and the time it takes to reach the break-even point can be major disadvantages of it. That’s why it may be easier and less risky to imagine you’ve refinanced yet still make extra payments. This can help you to pay off your loan more quickly and safely.
- 3. Look for cheaper insurance Lowering your homeowner’s insurance premium helps to drop your mortgage payment too. Asking for higher deductibles, improving home security, keeping a good credit record or bundling your car and home policies can all help to loweryourhomeowners insurance. If successful in this strategy, it’s recommended that you continue to make the same payment to help speed up that payoff date.
- Switch up your payment schedule Bi-weekly payments rather than monthly ones can surprisingly bring you closer to your payment date… well, sort of. This alternative payment system helps you to make one extra month’s payment annually so the payment seems just a bit less daunting.
- Don’t be afraid to downsize Selling your home in exchange for a smaller, cheaper one can be one of the extreme yet effective ways to free yourself of a huge mortgage. The equity from selling your home can then be used to cover the cost of the smaller one. If this option seems too heart wrenching for you, you can consider smaller scale options like converting the less necessary parts of your home (such as a garage or guest rooms) into an apartment and rent it out. Income from renters can be extremely useful when paying down your mortgage.