Pay off Your Mortgage Faster!

Save on mortgage debt

Save on mortgage debt

If you have purchased a property or are considering doing so, you probably appreciate the massive chunk of debt involved. It’s usually the most debt a person will get into in their lifetime and usually spans two or more decades.

While it is most definitely in your best interest to pay off your mortgage efficiently and quickly, many people don’t put much thought into their weekly or monthly mortgage payments. Paying off your mortgage early can help you have a better retirement lifestyle, or provide for your children’s college costs more easily and it is nearly always in your best interests to pay off your mortgage as soon as possible.

Here are a few simple methods for paying down your mortgage faster and more efficiently!

1) Simply pay more

By adding even a small amount of money to your repayments you can shave months or years off of the time you will spend paying off your mortgage. The faster you attack the mortgage, the less interest you have to pay. If you can manage it, pay an additional $100-500 per month off of your mortgage and you will pay it off much more quickly.

If you can pay off 13 months of mortgage payments in the space of a year instead of 12, then you are looking at cutting a couple of years off of the like time of your mortgage. Double check with your bank that the additional money is being used to pay off the loan principle and not being set aside for future payments.

2) Move to more frequent payments

A less painful way to reduce mortgage debt is to increase the frequency of payments. So instead of paying $2000 a month, talk to your bank about making a $1000 payment per fortnight. Again, make sure that the bank is immediately applying the payment to the loan principle and you can save as much as 4 or 5 years off a 30 year loan.

3) Use extra money on the mortgage instead of splurging

If you are lucky enough to receive money from a gift or inheritance, look at applying it to your mortgage principle. Before you do that though, see if you have other more costly debts that you would be better paying off. If you have two maxed out credit cards which are accruing interest at 20% per annum, pay those off before your mortgage.

When you use a lump sum to pay down your mortgage, you benefit substantially and can knocked off a number of years from the loan repayment timeline.

If the interest rate on your mortgage is low, you could instead invest the money in a high interest fund or even in the stock market and let it grow at a faster rate than your mortgage. However remember that any investment with a high return also carries more risk.

4) Refinance your loan if it makes sense

Always look for better deals on your mortgage including other mortgage providers and refinancing with your different lenders. The only issue is qualifying for a new loan, but if you manage your finances well this should be no problem for most mortgage holders.

If your home has declined in value after a property bubble has collapsed, it could also be a problem when going in for refinancing. The bank might refuse refinancing if the loan to value ratio has changed negatively.

If you can manage to refinance your loan, you may be able to knock a number of years off of the remaining loan term.

5) Sell your house!

Sometimes paying off a huge mortgage is not worth all of the stress. Your living situation may have changed and you may no longer need a large house. Perhaps you have grown older and paying off an expensive apartment in the middle of the city is no longer a good idea when you would prefer the quiet life in the suburbs.

If your lifestyle has changed in the last few years it might be a good idea to simply sell up and by something more appropriate. You might even find a nicer home in a little busy neighborhood and shave a few years off of your mortgage!

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