How to Pay Off Your Mortgage Early and Save Thousands of Dollars

With proactive strategies, you can pay off your mortgage early and save thousands of dollars. This article explores various strategies to consider.

How to Pay Off Your Mortgage Early and Save Thousands of Dollars

For most people, a mortgage is the largest debt they will ever take on. Paying it off early may seem like an impossible task, but with some proactive strategies, it can be accomplished. Not to mention, paying off your mortgage early frees up cash to save for retirement, travel, or invest in other opportunities. In this article, we will discuss some strategies to help you pay off your mortgage early and save thousands of dollars.

Make an Extra Mortgage Payment Each Year

Making an extra mortgage payment each year can save you thousands of dollars over the life of your mortgage and shorten your loan term significantly. This strategy works by applying the extra payment directly to your principal balance. As a result, you’ll pay less interest over time and may be able to pay off your mortgage years in advance.

To implement this strategy, divide your monthly mortgage payment by twelve, and then add that extra amount to your mortgage payment each month. Some lenders may offer a bi-weekly payment option that will have the same effect. Check with your lender to adjust your payment schedule if necessary.

Refinance to a Short-Term Mortgage

If you can afford higher monthly payments, refinancing to a short-term mortgage may be a good option. Shorter-term mortgages typically come with lower interest rates, which means more money goes toward paying off your principal balance.

In addition to saving on interest, a shorter-term mortgage typically has a higher monthly payment. However, the benefits of paying off your mortgage years in advance and lower interest rates can save you thousands of dollars over time.

Increase Your Monthly Payments

Increase your monthly mortgage payments is a great way to pay off your mortgage early. Increasing your monthly payments, even by small amounts, can lower your loan term and save you thousands of dollars.

To find the amount you need to increase your payments by, use an online mortgage calculator and plug in your details. This will show you how much time and money you will save by increasing your payments. Consider increasing your payments by a comfortable amount that works for your budget.

Apply Windfalls to Your Mortgage

A windfall, such as a tax refund or bonus from work, offer you an opportunity to make an additional mortgage payment. Applying those extra funds to your mortgage will help pay off your mortgage debt faster and save you thousands of dollars.

Make sure to inform your lender of your intention to make an extra payment and specify that it should be applied to your principal balance. This way, the additional payment will go to pay down the principal balance instead of interest.

Bi-Weekly Mortgage Payments

Another option is to switch to bi-weekly payments instead of making monthly payments. By doing this, you’ll pay the equivalent of 13 monthly payments each year. This can take years off your mortgage and save you thousands of dollars.

When considering this strategy, be sure to check with your lender to see if there are any fees associated with setting up bi-weekly payments.

Sell and Downsize

If downsizing your home is an option and you’re looking to pay off your mortgage as quickly as possible, it may be worth considering selling your current home and purchasing a smaller one. In doing so, you can use the surplus cash to pay off the remainder of your mortgage.

Although, this strategy requires you to incur the costs of selling your current home, and to find a smaller home that meets your needs and your budget.

Conclusion

There is no one right way to pay off your mortgage early. It’s crucial to find what works well with your lifestyle and budget. Using the strategies in this article can help you pay off your mortgage early and save thousands of dollars.

Remember, paying off your mortgage early can free up cash for other financial goals and create a better financial future for you and your family.