Paying off your mortgage early can save you hundreds of thousands of dollars in interest and give you peace of mind when the property is paid off and owned free and clear. Here are a few simple strategies you can implement:
1.) Biweekly Mortgage Payments
Make biweekly mortgage payments. Instead of making monthly payments, pay half of your mortgage payment every two weeks. This would result in you making 26 half payments which equates to 13 full payments versus the typical 12. This can shave years off the term of your mortgage loan.
2.) Round-Up
Round up your monthly payment to the nearest $100. For example, if your mortgage payment is $3,160. Add an extra $40 to your payment. This will compound exponentially over time.
3.) Snowball Strategy
The snowball strategy is where you pay off other debt, and then apply those payments towards your mortgage. Let’s assume you have a car payment of $350/month. Once this auto loan is paid off, continue to apply the same amount toward your mortgage loan. This strategy can help take anywhere from 5-10 years off the term of the mortgage loan.
4.) Recast
Apply any windfalls of cash towards your mortgage. If you get a bonus or inheritance, use that money to make a lump-sum payment towards the principal on your mortgage. You can think of it as aggressively cutting your amortization schedule down.
5.) Refinance
Refinance into a lower rate on the mortgage loan. Many people shy away from refinancing because they think their amortization schedule is resetting or the interest rate is unfavorable. The benefit is that you will pay your mortgage off faster. Your principal balance is accruing less interest with the lower interest rate meaning more of your monthly payment is going toward principal.
If you have questions about paying your mortgage off early or whether a refinance makes sense for you in the current interest rate environment, please reach out at 760-930-0569 to speak with one of our Mortgage Loan Originators.
