If you have a mortgage, you know how much it can take away from your paycheck each month. But there are ways to pay it down faster without having to sacrifice other important financial goals.
Make Your Payments Automatically
Another way to streamline your mortgage is setting up automatic withdrawals from a checking or savings account that will be credited toward the loan on a specific date each month. This makes it simpler to stay on top of payments and prevents late fees.
Biweekly Payments
If your lender permits it, a biweekly mortgage payment plan can be an excellent way to reduce interest and the length of your loan. On average, this could cut four to six years off the typical 30-year loan depending on your interest rate and loan amount.
Before signing any arrangement, be sure to double-check with your lender to see if there will be any extra fees associated. If not, then opting for the standard 12 monthly payments may be best.
Use Money Outside Your Budget
You might be amazed at how much extra money can go toward paying off your mortgage each year, whether from a tax refund, an additional payment from your employer or even a one-time bonus. Here’s how!
This strategy can reduce your total interest paid on the loan and shorten its overall term, making it easier to pay off your mortgage early. But make sure all extra money goes toward paying down principal rather than delaying payment until a later date.
Rent Your Home
The sharing economy is on the rise, making it more and more possible to rent out an extra bedroom, garage space, or even your entire house. This can be a great way to generate extra cash and pay off your mortgage quickly.
Before investing this money, be sure to assess its impact on other debts and financial needs. If you have high-interest debt, an unfunded 401(k), or retirement savings that need funding, it may be more advantageous to use the funds elsewhere.
Take a Second Job
As you work toward paying off your mortgage, having an additional source of income to cover some expenses during slow times could be beneficial. According to Neal Frankle on Wealth Pilgrim, taking on a second job can increase savings and extend the number of years until full repayment of your mortgage.
Invest Your Extra Money
It may be beneficial to invest some of your extra funds in the stock market or another type of investment. While these investments may offer high returns, the risk is usually considerable.
You can contribute additional income towards your mortgage by setting up a Home-Equity Line of Credit (HELOC), which could potentially lower monthly payments. Just be sure to pay off the HELOC promptly and check with your lender to see if there are any prepayment penalties associated with taking advantage of this opportunity.
