The majority of homeowners turn to mortgages for home purchases because it's not feasible to pay those sums out of pocket. While making your payments on time is a priority, you should also try to shorten the duration of the home loan. By paying your mortgage off sooner, you can become debt free quicker and save thousands in interest charges.
How to Pay Off a Mortgage Loan Early
1. Pay Extra
A simple way to pay off a mortgage quicker is by paying extra on your bill every month. Whether it's a couple of dollars or a few hundred, the more you pay on your principal balance, the less interest you end up accruing. Over time, these small payment increases can significantly reduce your costs as well as the length of time you pay on your loan.
You can also pay off your mortgage earlier by refinancing with a shorter-term loan. Most buyers choose 30-year repayment plans because it allows them to obtain a lower payment. However, you usually end up paying a higher interest rate and spending more out of pocket in the long run. Instead, switch to a 15-year loan.
If you originally obtained a 15-year mortgage, you may still shorten the length of your loan by refinancing for a lower interest rate. While the timeframe will technically be the same, you can pay it off sooner by continuing to pay the amount of your original payment. It will reduce your balance quicker and save you money in the long run.
3. Bi-Weekly Payments
Another way to pay off your mortgage faster is to pay half of your total monthly payment every two weeks. Over the course of a year, you end up making 26 half-payments, which translates to 13 full payments — one more than your monthly schedule. Confirm with your lender that there are no prepayment penalties before committing to this plan.
Whether you're ready to buy the home of your dreams or refinance your current property, contact Fairway Independent Mortgage Corporation. Located in Minneapolis, MN, they offer both conventional and government-backed mortgage options, including FHA and USDA, as well as refinancing opportunities. Apply for your loan today or learn more about the current mortgage rates by contacting the team online or over the phone at (952) 797-6032.