Although most fixed-rate mortgages are for 30 years, it doesn’t have to take that long to pay it off. There are strategies you can use to speed up the process and save a ton of money on interest. If you’re ready to own your home free and clear, here are some tips that can help you pay your mortgage faster.
Round up your payments
You won’t make a big dent in your debt by paying exactly what you owe. So, the next time you write a check for your mortgage, round up the payment. For example, if it’s supposed to be $921, send them $930 instead. If you have more money to spare, make it $1,000. Be sure to indicate that you want the excess applied to the principal.
Increase your monthly payments by one-twelfth
Making one extra monthly payment each year can significantly shorten the life of your loan. The easiest way to come up with the money is to increase your monthly payments by one-twelfth. If your mortgage is $2,400 that means you’ll pay an additional $200 each month. By the end of the year, you will have made 13 full monthly payments instead of the usual 12.
Put all your extra cash towards the principal
From this point on, put any windfalls you receive towards your mortgage’s principal. You can use your birthday money, cash back you’ve earned from online shopping or your holiday bonus to chip away at your debt. Using your tax refund is also an option. This year, over 101 million taxpayers received a refund from the IRS with the average amount being $2,729. Rather than blow yours in 2020, use it to get one step closer to being debt-free. When you file with ezTaxReturn, you’ll get the biggest possible refund, guaranteed.
Refinance to a shorter term
If you plan to stay in your home for a long time and can afford a higher monthly payment, consider refinancing to a shorter term. A 15-year mortgage offers better interest rates than a 30-year mortgage. Plus, you’ll pay your home off faster. Before you make your move, use a refinance calculator to see if refinancing is the right option for you. Keep in mind, you will need to pay closing costs which are about 3% of the loan.