If you are a homeowner who is in a long-term mortgage payment plan, you can slash the loan term or reduce your monthly mortgage payments using some strategies. We give you some reasonable strategies that do not involve a lot of effort on your part.
An extra payment
Every year make an extra payment towards the principal sum of the loan. That way, you can get some savings. Perhaps a bonus or a tax refund may provide the needed cash for this method. Earmark the amount toward the principal. You can reduce the term by a few years.
The faster you reduce that loan amount, the lower will be your cost of burrowing. Therefore, you must work towards bringing down the principal loan amount if you want to pay off your mortgage faster. If not the tax refund, budget your monthly expenses to see how you can squeeze in that extra amount.
Make biweekly payments
To pay your mortgage faster, divide your monthly mortgage payment into half and pay it every fortnight consistently. By the year-end, you would have made 13 monthly installments. This can shave off a few years depending on your loan amount and the interest rate.
Not every bank or lender will accept such payment terms. So, you need to check with them whether fortnightly payment is allowed or not. If they do not allow this strategy, stick to your monthly payment plan, and look for some other methods that can help you pay off your mortgage quickly.
Send extra money
Send some extra amount over and above your mortgage payment each month. This works especially well for individuals who are challenged in self-discipline. You can add a few hundred dollars to the mortgage payment amount. If you cannot afford that, try rounding up the payment to the next 100 to make accounting simple.
The extra money should go towards paying off the principal sum to reduce the interest and loan. Contact your mortgage lender to assess how it handles amount that exceeds the monthly bill. Actual savings vary depending on the lender, interest rate, and loan amount.
Refinance your mortgage
Another way you can pay off your mortgage quickly is by refinancing. What that means is that it allows you to bring the interest rate down, thereby resulting in some significant savings. You can also consider refinancing your loan amount for a shorter time frame to pay off the debt quickly.
When you are refinancing, contact a lender or financier that offers a mortgage for a flexible term. If you choose a shorter term, you will be paying less money over time towards the interest. Consult a mortgage broker to determine the most comfortable term for you.
Recast your mortgage
If you are lucky enough to get a windfall or an inheritance, recast your mortgage loan so your service provider can amortize the loan. That way, the monthly payment is lowered but your term remains the same. The new mortgage payment would depend on the lump sum you paid. Some loan providers offer this option.
If you are recasting your mortgage, you can pay your mortgage quickly by continuing to make the same previous payments and applying the balance towards the loan amount. However, some mortgages cannot be recast. Lenders have various requirements regarding how much can be recast or how often it can be recast.
