Paying off your mortgage ahead of schedule has the potential to save you a large amount of money. By paying off your mortgage as quickly as possible, you reduce the amount of interest that you will pay over the life of the loan and can build equity in your home faster. There are a number of different ways to go about paying your mortgage off early and the method chosen will depend on your personal preferences. Some methods of paying down your mortgage are safer, faster and more painless than others. Here are some good ways to go about paying off your mortgage before the end of the loan term.
Pay More With Each Payment
One of the easiest ways to pay off your mortgage early is to increase the amount of money that you send in for each payment. Every dollar that you send in over the amount required should go towards the principal of the loan, effectively shortening the amount of time that you will be paying the principal. This also reduces the amount that you pay in interest as the loan amount declines. However, this is only an effective repayment method if the extra amount is applied to the principal balance and not held over for the next payment and there is not a prepayment penalty clause written into your mortgage contract.
Refinance And Choose A Shorter Term
While many mortgages are written for a 30-year term, you may be able to refinance your home for a shorter loan term, allowing you to pay off your mortgage faster. Your payments will be higher with a shorter loan term, because you are paying more of the principal with each payment, but you will pay less in interest over this time. Refinanced loans often have lower interest rates to begin with, so you can save a significant amount of money by refinancing to a shorter loan term.
Make Your Payments Bi-Weekly
Another easy way to reduce the amount of time that you are paying on your mortgage is to make your payments bi-weekly instead of monthly. This method takes advantage of the fact that there are 52 weeks in the year, yet only twelve months. If you make half of your payment every two weeks, you will end up with the equivalent of 13 months worth of payments at the end of the year. Making the equivalent of an extra payment each year can reduce a 30-year mortgage by about 6 years.