How to Pay Off Your Mortgage Quicker

Buy a Home That You Can Afford

Many people make the mistake of taking on a mortgage that is far bigger than necessary. The amount that your bank or lender gives you isn't what you have to take on. However, many people will use that amount to set a monthly budget. Instead of using the mortgage amount that the bank says you qualify for, look at your budget, and decide how much you are willing to spend. It may be that you need a lower mortgage amount than what the bank suggests, which can save you time and money.

Use Mortgage Points

Mortgage points, or discount points, can also help you pay down a loan faster. These are fees that you can pay a lender directly at the time of closing to help lower your interest rate. This works to lower the monthly repayments. 1 point is equal to 1% of your mortgages total amount. So, if your mortgage amount is $200,000, one point is the equivalent of $2,000.

Pay Off Debts

If you have other debts, such as high rate credit cards, paying them down can help you pay your mortgage off faster. Start with the debt that is the most expensive. By doing this, the interest on that debt won't build up as fast, which means more money to help pay down other debts.

Make Extra Payments

Paying extra towards your mortgage means that more money is being applied to the principal of the loan. Let's say you have a mortgage for 200K at 4% interest and a term-time of 30 years.

l Making an extra payment every 3 months can save you $65K in interest payments and cuts about 11 years off of your term time.

l Make bi-weekly payments – this equates to an extra payment every year and can save you about $24K and cut 4 years off of your term.

l Rounding up – by rounding your payments off, you are putting a few dollars extra towards your monthly repayments.

l Use extra cash – if you got a bonus, inheritance, a tax refund, or any unexpected funds, put that towards raising your mortgage repayments.

Tip: Be sure to check the terms of your mortgage regarding making additional or early payments so that you don't incur a penalty.

Cut Down on Spending 

There are many ways that you can cut down on your spending. Going for a cheaper brand when shopping, growing your own vegetables, foregoing a vacation, and not making impulse purchases is a good start.

Pay Down the Principal Early  

You'll notice that, during the first few years, a big chunk of your monthly repayments goes towards the interest, which makes it seem like the principal amount isn't being touched. Working to make extra payments to get the principal down sooner means paying interest on a lower amount. The money you save each month can be put back into the mortgage principal.

Refinancing

Another way to get your mortgage paid off quicker is by refinancing. While you may be making higher payments, you can cut the term time down, get an interest rate that is lower, and save you thousands of dollars.

There are many ways in which you can cut your mortgages term time if you are committed and have patience. If you need more guidance regarding how to pay your mortgage off quicker, give our Atlanta mortgage lender team a call today!