Mortgage debt has been growing exponentially – Experian reported that between 2019 and 2020, it grew to a record high of $10.3 trillion, increasing 7 percent, which was the fastest rate in at least a decade.
When you bought your home, you probably used a house payment calculator to determine how much you can afford. But once you’ve moved in and the reality sinks in as to how long it’s going to take to pay off, you might want to figure out how to get that accomplished sooner. It may seem nearly impossible, but by taking advantage of these tips, you can cut the amount of time and save a good chunk of money in interest payments.
Make Biweekly Payments
By making half your mortgage payment every two weeks over the years, you’ll be paying an additional 26 half-payments, or 13 extra full monthly payments each year.
Before tackling this one, you’ll want to check with your lender to find out how biweekly payments are handled, as some will process them while others refuse to accept partial payments.
If it’s not an option for you, an alternative is to deposit the half-payment in your bank account every two weeks, using that money to make your full mortgage payment each second deposit.
Use Unexpected Cash to Make Additional Payments
Whenever you receive a bonus or any other unexpected cash, you or your spouse get a raise, etc., use that extra money to make additional payments on your mortgage.
You might be surprised at how quickly it can add up. In fact, research revealed how one couple managed to pay their $95,000 mortgage in less than three years by following this advice. As they began earning more, they didn’t spend or borrow more.
If you’re able to get a lower interest rate by refinancing your mortgage, your new home loan will probably have a lower monthly payment. But by making the same payment, you can potentially cut years off your mortgage while saving thousands of dollars in interest. Another option is to refinance and take out a 15-year loan instead of having a 30-year mortgage.
While it might seem like the monthly payments will be way too high to make it affordable, the reality is you’ll have a lower interest rate which means it won’t be as much as you think. If it is too high, consider refinancing with a 20-year mortgage instead.
Live a More Frugal Lifestyle
Look for ways to cut back on all of your expenses, living a more frugal lifestyle. You might switch to a less expensive cell phone plan, get rid of cable and stream shows instead, give up your daily latte’ habit, start clipping coupons to save your grocery bill, and bring your lunch to work instead of dining out. All those sacrifices can pay off big in the long run if you use all the cash you save to make extra payments on your mortgage loan.
Even just an extra $20 a month can mean paying it off a year early – manage $100 a month, and you’ll get an extra five years with no mortgage payments.