This is a BattlePlan Virtual, finance content marketing and “how-to” sample. First shared via Terri Bell and Associates, IN THE BLACK Newsletter, Volume 1, Issue 4.
Not interested in spending three decades with mortgage debt???
After all, if you pay off your mortgage in less than its 15, 20 or 30 year term, you can access all that equity if needed, making your home a true asset. Plus, you’ve got a roof over your head without worry of foreclosure–assuming you keep up with any property taxes.
If you want to become completely debt-free earlier, here are ten things you can do to pay off your mortgage in far less time.
1. Make a Bigger Down Payment
The larger your down payment, the smaller your loan–and the faster you’ll be able to get out of debt.
A 20% down payment allows you to get a home loan without also having to pay for private mortgage insurance (PMI). When you make PMI payments, that money isn’t reducing your debt, and it can be expensive. PMI can cost up to 1% (or more) of your mortgage amount per year. So, on a $150,000 mortgage, that’s about $1,500 just going toward PMI each year and not reducing your debt.
Consider saving up for a bigger down payment to reduce your overall loan and avoid PMI. It’ll make it that much easier to pay off the mortgage sooner.
2. Make a Bigger Payment Each Month
How much extra should you pay each month to pay off your mortgage in less than 15, 20, 30 years?? Call your Accountant or your mortgage provider to get some help crunching the numbers.
3. Make Bi-Weekly Payments
If you opt to make bi-weekly payments on your mortgage, you’ll make an extra mortgage payment every year. Making 26 payments a year cuts almost five years off a typical 30-year mortgage.
There are a couple of ways to do this. You can manually make 1/2 of your mortgage payment every two weeks. This is great if it aligns with when you get paid! Or you can use a free bill pay service to set up automatic payments for this purpose.
If you’d rather stick to making your payments monthly, just add 1/12 of a monthly payment to each payment, and you’ll reap the same benefits of bi-weekly payments.
4. Prioritize Your Mortgage Payments
You might be trying to figure out where you’re going to get the money to pay off your mortgage in less time, but it is possible when you prioritize the mortgage payments.
Where are you spending money? Take a look at your past purchases to see where you might find extra cash. Do you eat out multiple times a week? Cut back on your dining out budget and cook more at home. Instead of going on a big expensive vacation, consider taking a smaller vacation. You don’t need to stop having fun, but it does make sense to re-evaluate what you do and what you buy.
If getting rid of the mortgage is a priority, you’ll find ways to funnel money toward that goal, rather than spending it on things that don’t matter as much.
5. Buy a Smaller Home
Really consider how much home you need to buy. There’s a good chance you can get approved for a bigger, more expensive house–but should you really take the entire amount a lender is willing to give you? A smaller mortgage is more manageable, and it’ll cost less in interest, too.
The less expensive your home, the smaller your mortgage, and the easier it will be to pay it off much sooner and free yourself of burdensome debt!
6. Get Rid of High-Interest Debt First
If you want to put more money toward paying off your mortgage, you need to get rid of any high-interest debt you already have, especially credit card debt. The interest on this type of debt erodes what you can put toward the principal, slowing down the entire process.
Make your minimum mortgage payment and tackle your credit card debt. When your high-interest debt is gone, you can put all that money toward reducing your mortgage balance.
One way to handle this is to by transferring the debt to a 0% balance credit card to avoid paying interest for a fixed time (up to 30 months) and paying off a set amount every month. . If you still have debt after the 0% period ends, move to another 0% balance credit card deal to complete the interest free payoff. DO NOT, Repeat, DO NOT use this card for purchases.
7. Put Windfalls Toward Your Principal
Another way to hasten your mortgage payoff is to put any windfall you receive toward your principal. For example, tax refunds, special bonuses at work, and other unexpected money should be used to reduce your mortgage principal.
Contact your mortgage servicer to find out how to make an extra principal payment. Some loan servicers have a specific process you must follow, and you may need to make a second payment, after your regular monthly payment, in order to ensure that you’re reducing the principal with your extra payment.
8. Earn “Side Hustle” Income
One way to get extra money to put toward your mortgage pay down is to earn a side income. If you have some extra time, and you want to turn it into money, do so. You can put that new income toward your mortgage, reducing the amount of time you’re in debt.
9. Refinance Your Mortgage
You can also refinance your mortgage in order to focus on it and pay it off faster. Refinancing to a lower interest rate can be especially helpful because you’ll end up paying much less over time.
The main caveat to refinancing your mortgage to a lesser term is the fact that you’ll have higher payments–and you can’t take a break from them. If you end up with a job loss or other financial emergency, you might not be able to afford the higher payments on a shorter term mortgage.
10. Use a combination
Use a combination instead of just applying one of these methods to meet your goal of paying off your mortgage loan early and freeing yourself of your largest debt!
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