5 Ways to Pay Off Your Mortgage Faster
Purchasing a home is a huge milestone and a major accomplishment but paying off your mortgage as early as possible will be the best investment you can make. Recent surveys indicate that 68 percent of recent homeowners felt there was a strong chance they could pay off their mortgage earlier than their current amortization schedule. It has also shown that 27 percent have either made additional lump sum mortgage payments or have increased their regular payment amounts.
Stay Up to Date
Once you have a mortgage and start making your payments, it can be easy to just forget about it because it’s an automatic payment. But do not stick your head in the sand. To be an informed homeowner, you need to keep up-to-date on interest rates and new mortgage options. You could potentially save a ton of money just by understanding what your options are.
Increase Your Monthly Mortgage Payments
For the sake of consistency, a lot of people like to put a little more into their mortgage payments every month. Prepaying a little each month is not only a good idea, especially early in the life of your mortgage, but will allow you to maintain a consistent monthly budget. Regardless of how you decide to increase your payments and pay off your mortgage sooner, it is always a good idea to make sure that your payments are being handled as they should be. Sometimes when the lender receives a payment from you without expecting it, since normally payments are all set up on a monthly cycle, they will not know what to do with your extra payment.
Make an Annual Lump Sum Payment
Most banks will allow you to make an extra mortgage payment each year, which is applied directly to the principal. Taking advantage of this by making a lump sum payment — even if it is as small as $50 a year — is a great way to chip away at your mortgage.
Set a Deadline
If you have a specific date in mind that you want to be mortgage free—such as on your 50th birthday, when your kids are finally out of the house, or when you retire—figure out how much extra it will take.
Now, the math, when calculating how to speed up your mortgage can be complicated. However, there are a wide variety of helpful mortgage calculators available online.
Get Rid of Any Private Mortgage Insurance that You Might Have
PMI or private mortgage insurance is charged by lenders when you take out a conventional home loan with less than a 20% down payment. But you can request a cancelation after you pay down your mortgage balance to 80% of the original value of the property.
If you have a 30-year fixed-rate loan for $180,000, the PMI could be close to $100 per month. Getting rid of that premium frees up $100 that you could use to pay down your principal instead