On my journey to becoming debt free, I’m constantly thinking of expenses that can be eliminated. My most costly expense is my mortgage. I know you are probably thinking, well you have not been in your home long at all. That is correct. My family and I relocated just a little over 3 months ago, and it is my goal to have my house paid off in under the term time that I initially agreed to.
Prior to relocating, I made sure to pay off all of my credit cards, canceled any existing subscription that I was not using and went on a strict budget. I have already started to explore all of my options to help get my house paid off faster and wanted to share some tips with you as well so check them out below.
- Make 1 Extra payment a year. Making just 1 extra mortgage payment a year can reduce your mortgage term of 30 years buy taking off 8 years.
- Apply unexpected money to your mortgage. If you are a person that typically gets tax refund money back every year, or have received a stimulus payment, these payments can be a budget friendly way to reduce your mortgage terms in the event option 1 is not an option for you.
- Make an extra payment each quarter. This method can help you pay off your mortgage 11 years earlier and save thousands in interest.
- Refinance. If when you first purchase your home, the interest rates were higher than what they are at the present moment, you could essentially reduce your monthly mortgage payment and have a shorter term by refinancing to a smaller balance and or a lower interest rate.
- Bi-weekly Payments. This is another payment technique that could essentially result in 26 half payments, equaling out to being 13 full monthly payments each year by breaking your total monthly mortgage payment in half bi-weekly.
- Put down a larger downpayment. The more money you are initially able to put down means the less that you will have to finance over time. Try to put down at least 10%, 20% would be even better because it helps you avoid needing to pay private mortgage insurance (PMI).
- Pay extra. By making additional principal payments, you will shorten the length of your mortgage term and it will help you build equity faster.
- Live within your means. Sure banks will tell you that you are pre-approved for more than you can actually afford when it comes down to buying a house. This is because the banks do not take into consideration what your utilities will be, the cost for groceries, the cost of those date nights, clothes, and the list can go on. So instead of purchasing a house for all the way up to what you are pre-approved for try to live in a means that will allow to have an emergency fund, as well as to live comfortably.
When it comes to you and what is best for your household hold, there is no wrong way to pay off your mortgage faster. A home is supposed to be a blessing not a financial burden. The benefit of paying off your home sooner is that you will have less total payments to make and get more savings over time, which if you ask me is a WIN! WIN!