Are you looking to pay off your house quickly? A mortgage can be a severe financial burden—but it doesn’t have to be. Make your mortgage work for you with a couple of these quick tips.
Make Payments More Often
Contact your lender to see if you can set up a biweekly payment plan. Rather than making your mortgage payment monthly, just split the amount in half and send it biweekly. If you are unable to set up a biweekly payment plan with your lender, your mortgage company will likely hold the first half the payment until you send over the second half. According to Dave Ramsey, making biweekly payments can cut eight years off of a 30-year mortgage.
Making one extra payment a year to the principal amount can also make a big difference. Making one additional payment each year for a 30-year mortgage can cut off 2-3 years of payments. If this isn’t an option for you financially, even just sending a small additional amount each month helps tremendously. It may be helpful to round your payment up to the nearest hundred-dollar amount or add an extra $100 to a payment—this may be one of the simplest ways to quickly bring down your mortgage.
Refinancing and Recasting
Refinancing your mortgage can help eliminate debt in multiple ways—it can lower your interest rate, resulting in savings, and cause you to pay off your mortgage quicker. Refinancing for a shorter term will help you to get out of your mortgage faster. Though monthly payments will be higher with a shorter-term loan, it will be paid off more quickly. You could cut your interest costs considerably over the life of the loan.
Some loan servicers will offer an option to recast your mortgage. If you come into an inheritance or large sum of money and pay it towards your principle, it can impact the amount you end up paying in interest.
Rent it Out
Are you using your whole house? If not, renting out a room or a floor of the house could help you to cut down that mortgage payment. When you have tenants helping you to pay your mortgage, you may be able to refinance to a 15-year option or make a higher monthly payment or biweekly payments. Consider renting out to make your mortgage a little more manageable.
Select a Flexible Term Mortgage or Try an Adjustable-Rate Mortgage
A flexible term mortgage will offer more than the standard options—i.e., a 15-year and 30-year mortgage. Shorter-term options will have higher monthly payments but will also mean paying less interest over time.
An adjustable-rate mortgage starts with low introductory interest rates that are adjusted to a higher rate at a specified time, typically 3-5 years. In some cases, an adjustable-rate mortgage can help to build equity quickly and free up some money with a low starting interest rate. Adjustable-rate mortgages can also be hard to handle when rates increase—be sure that you are prepared for what you’re getting into.