Pay of Your Mortgages Early
If you’re like most people, your mortgage is probably hundreds of thousands of dollars. Mortgage debt has been on the rise – Experian recently reported that the average mortgage debt is over $202,000, with the average sales price for new homes increasing 46% over the past decade.
Paying off all that debt in one chunk is pretty much impossible unless you win the lottery, or get some other unexpected windfall. The good news is that even if you have a 30-year home loan, you can shave years off that timeline to save a significant amount of money in interest payments.
Refinance With a 15-Year Loan
If you have a 30-year mortgage and refinance it, taking out a 15-year loan instead, you’ll pay a lot less in interest. If you think you can’t afford it because it will double your monthly payments, think again. Due to the lower interest rate, they won’t be that high. Using a house payment calculator can help you figure out how much. If you can’t afford it, you might consider refinancing mortgage with a 20-year loan instead, as you’ll still pay it off much quicker.
Pay a Little Extra Each Month
If you decide not to refinance, you can put some extra money toward your mortgage every month. Even if it’s a small amount, like $50, consistently adding that much extra can make a big difference. For example, if you have a mortgage for $200,000 you’re paying 5.5% interest on, you’d save over $24,000 and pay off the loan in a little over 27 years instead of 30. Of course, the more you add on to that payment, the quicker it will be paid off, and the more you’ll save.
Make Bi-Weekly Instead of Monthly Payments
While it may not sound like it would make much of a difference, instead of paying monthly payments, make bi-weekly payments. This means you’ll get a full month’s extra payment each year. If you have a 30-year $200,000 mortgage, paying a 5% interest rate and stick with this habit, you’d pay off the loan nearly five years early and save more than $34,000 in interest.
If you want to be in the envious position of having no mortgage payment as soon as possible, consider selling your current home and using the profits to purchase one that’s less expensive. The benefits of selling a larger home may even be enough that you can pay cash for a new one, but even if you have to get a small mortgage, you’ll have managed to reduce your debt significantly. The lower that balance is now, the faster you’ll be able to pay it off entirely.
Make a Few Small Sacrifices
Think about all the money you spend on things like Starbucks coffee, going out to lunch, subscriptions you rarely – if ever use, gym memberships, and so on. Making a few small sacrifices can go a long way in getting that mortgage paid off. For example, if you spend $3 on coffee every morning, that’s $90 a month you could be adding to your mortgage payments – on a 30-year loan, you’d save around $25,000 in interest and pay it off four years sooner too.