Acquiring a home is a decades-long process, requiring years of patience and hard work to pay off the mortgage. When you take out a home loan, you’re signing yourself up for years of a mortgage with rates that vary, depending on your downpayment and the price of the house. Nevertheless, the debt will be paid eventually.
But what if you can pay off your mortgage early? Imagine the freedom of not having to deal with the increasing mortgage rate in Utah or any other state every month and using the money for something else. If this sounds promising to you, here are some ways you can pay off your mortgage earlier:
Buy a home within your budget
The first thing that you need to do to pay off a mortgage early is to buy a home that you can afford. Before shopping for a home, determine what mortgage you can afford now and not years in the future–buying a house in hopes that you’ll be in better financial shape years from now is a bad move.
Moreover, compute your budget based on your income; don’t just rely on what the bank or the lender says you can afford. Chances are they’re going to give you a value that is higher than what you can actually afford.
Keep other debts on a down low
Racking up additional debts can lead to difficulty in paying off your mortgage, which can cause delays in repayment. While paying off your housing loan, don’t take out loans that you don’t need. Alternatively, you can pay off existing debts before taking out a mortgage. In this way, you can focus on one loan at a time, which is much easier compared to juggling multiple debts.
Switching to bi-weekly payments instead of monthly payments produces one month’s worth of extra payment per year. By doing this, you can significantly shorten your repayment term by as much as five years.
To illustrate, picture this: You have a $200,000 mortgage at 5% interest, with a repayment term of 30 years. If you make bi-weekly payments ($500 bi-weekly instead of $1,000 every month), this results in 13 monthly payments per year instead of 12. With this example, you can save about $34,000 from interest and pay off the loan in just 25 years.
Living a frugal life is easier said than done, but by making small adjustments in your lifestyle, you can pay more for your mortgage than for other things. Try setting a strict budget every month or cutting down on credit card transactions and switching to cash payments. There are many ways to save money; you just need to commit to the cause.
These are just some of the simple things that will help you pay off your mortgage early. These should be enough to get you a headstart on early repayment. Whenever you feel discouraged, remember that if you pay your loan years in advance, you’ll get to enjoy the remaining years debt-free.