Most homeowners opt for a 30-year mortgage because it is the most affordable option. This is especially true of first time homebuyers. Once you get settled in and are comfortable making your house payment each month, you may begin to wonder how you can pay off your 30-year mortgage in just 15 years. Fortunately, there are options and strategies you can use that will help you achieve that goal. Once you put a plan into place, it is important to stick with it so you reach your ultimate goal of paying off your mortgage early.
If you have some equity in your home, you can refinance to a 15-year term. The drawback to this is that your payments will be higher. Your lender can tell you what your interest rate will be and if it is better than the interest rate on your current loan, then refinancing may be the right answer. You’re likely to get a good interest rate when refinancing for a shorter term which will save you thousands of dollars in interest over the life of the loan.
Pay Extra on Principal
Decide where you can cut expenses and put additional money toward the principal. Any additional cash you have can be used to put towards the principal. Even if you can’t do this every month, do it when you can. This will decrease the amount you’ll pay in interest over the life of the loan and will go along way in getting your mortgage paid off faster.
Make an Extra Payment Per Year
If you receive a bonus from work or even a tax refund or other lump sum in cash, take some of that money and apply it to your mortgage as an additional payment during the year. The earlier in the loan that you can do this the bigger the impact it will have. This is because a majority of the interest you pay is at the beginning of the loan. The reason for this is that the interest is calculated based on the high principal amount owed in the early years.
Make Bi-Weekly Payments
A great way to shorten your loan term is to make bi-weekly payments. You can do this by making one-half of your regular payment every two weeks. The reasoning behind this method is that there are 52 weeks in a year so paying bi-weekly means you’ll be making 26 half payments or 13 full payments. That adds up to one full mortgage payment extra per year. If you are paid bi-weekly, then this is also a great way to manage your budget and will take away the temptation to spend that money elsewhere.
Owning a home is one of the biggest investments you’ll make in your lifetime. It is only reasonable to want to pay off the mortgage as early as possible. You are likely thinking of ways you could use that extra money when you get your home paid off and the possibilities are endless. If you are interested in learning more about paying off your mortgage early, call the professionals at Potempa Team. Our experienced staff can answer your questions and help you find ways to shave years off your mortgage. Contact us today to see how we can assist you.