5 Ways To Pay Off Your Home As Early As Possible
The largest investment that most people will ever make is when they purchase their home. Due to the large cost of buying a home, most buyers will end up taking out a mortgage to finance the purchase. After taking out this loan, it can be stressful knowing that you will still be making payments on the house 30 years later. Fortunately, there are five tips that can be followed to help you to pay off your home faster and eventually live without a mortgage payment.
Refinance into Lower Rate
The most effective way that you can pay off your mortgage is by refinancing into a lower interest rate mortgage. Interest rates today on mortgages are historically low, which makes it a great time to refinance. If you do choose to refinance into a lower mortgage, you could save hundreds of dollars per month through reduced interest payments. However, you will also have the opportunity to pay off your home faster if you continue to make the same payment after refinancing. Someone with a 30-year mortgage that is able to refinance a 4.5% mortgage to 3.5% could cut five years off their payment time without paying any more money on a monthly basis.
Increase Payment on a Monthly Basis
Another strategy that a lot of people are now following is to increase their monthly mortgage payment each year. One of the advantages of a fixed-rate mortgage is that your payments are fixed for up to 30 years. As inflation increases on an annual basis, your inflation-adjusted mortgage payment will effectively decline. However, if you are able to increase your mortgage payment by an inflationary amount each year, it could reduce the time it takes to pay off your mortgage dramatically. Even a two percent annual increase could cut ten years off your mortgage.
For people that are paid every two weeks, as opposed to twice per month, making bi-weekly payments is another easy strategy to follow. With bi-weekly payments, you will make payments to your mortgage payments equal to half your required monthly payment every two weeks. Ideally, these could match up to the date that you are paid. At the end of the year, you will have made 13 full payments instead of 12. This will quickly help you to pay down the outstanding mortgage balance and it could cut up to six years off of your payment schedule.
Cut Small Costs and Apply to Loan Balance
The average person today spends a lot more on frivolous items during the week than they realize. While a $10 daily lunch and coffee may not seem like a lot, they add up over the course of a month. Most of the time, cutting back does not end up being too much of a challenge. If you are able to find a way to cut back on your personal spending and then pay down your mortgage balance with the savings, it could save you a considerable amount of money.
Ultimately, the best way that you can pay off your mortgage faster is by spending less in the first place. While you will want to own a home that you love and are proud of, avoiding overspending is very important. Ideally, you should purchase a home that comes with a mortgage payment you can afford to make on a 15-year schedule. This will be a great starting point when it comes to trying to pay off your home and get out of all debt.
If you are in the market for a new home in Polk County, you should take a peep at some of the current MEGG Homes for sale. Our team at MEGG Homes can help find the perfect home for you, or help you by selling your property to MEGG Homes as-is. This can help you to find a great home that you can afford, which will allow you to reach the ultimate goal of paying off your mortgage and being debt-free.