Taking out a 30-year mortgage may seem like quite the burden. However, it may also be the only way you can get a payment low enough to afford.
Just because you choose a 30-year mortgage doesn't mean you have to take all 30 years to pay it back. Maybe you received a raise, paid off some debts or have another source of income and you'd like to pay more on your mortgage. Here are a few ways you can pay off your mortgage in less time.
When you pay your mortgage biweekly instead of monthly, you actually make 26 payments instead of 12. Even if these are just half your normal mortgage payment you are making 13 full mortgage payments every year. That extra payment can add up over the years and you can actually cut about 4 to 5 years off your mortgage.
Cutting 4 to 5 years off your mortgage can save a large amount of interest. Depending on your rate and the size of your mortgage, this savings can be $20K to $50K pretty easily.
Pay Extra when Extra Cash is Available
Whether it's a tax return, an unexpected bonus or another source of extra cash, paying it towards your mortgage will make a big difference. If you just pay your loan down by $10,000 with extra cash, you can save more than $15,000 off the back end of your loan. This can also save you more than 18 months off the back end of your mortgage.
If you paid extra with every bonus, tax return or unexpected amount of money you received, you can actually save even more money and time on your mortgage.
Pay More Monthly
When you pay even an extra $100 or more per month on your mortgage, you can pay your loan offer much faster. An extra $200 per month on a 30-year loan can save more than $35,000, depending on the rate and the size. This can save as much as eight years off the back end of your mortgage. Of course, the more extra you pay, the more you will save in both time and money.
Paying off your mortgage early can really help in many ways. It can free up cash in your monthly budget and even allow you to upgrade your home. Use these strategies to pay off your mortgage faster.