Refinancing your home is a financial strategy that can save you money when done at the right time. Refinancing is the process of revising your mortgage rate to that of the current environment, saving you money over time. Up Next: Understanding Streamline Finances When you apply for a refinance for your home but are rejected, […]
Strategies In Paying Off Your Mortgage
Whether you have a 15 or 30 year mortgage, the thought of being in debt for that long gives some homeowners a headache. After all, they want their house to be officially theirs. That is why many homeowners look for strategies to pay off their mortgage faster and painlessly.
With a little financial planning and following the strategies below, you can pay off your mortgage in a timely, stress-free manner:
Pay A Little Extra Each Month
One of the simplest ways to pay off your mortgage is to pay a little extra each month. For example, if your monthly payment is $857.20 you can round up and pay $860. While you are only paying a difference of about three dollars that money will be put towards the principal, helping save on interest.
If you can afford it, you can even pay an additional $100 or so per month.
Just remember, if you want that extra money to go towards your loan’s principal balance be sure to tell your lender that that is where you would like it applied. Otherwise, it may go towards your next payment or other fees instead.
Use Your Tax Return Or Other “Free” Money
Each year, we all look forward to the money we will get from birthdays, holidays, and our tax returns. When we get this “free” money we often think of fun things we can buy with it, like new clothes or a night out to dinner.
Why not put it towards your mortgage payment instead?
Unlike paying a little extra each month, paying with a tax return can be significant. For example, if you get $600 back, you can use either half or all of it. When paying such a large amount, remember to talk to your lender before doing so so they know how to apply it, and check your next statement to see if it was applied correctly.
Refinance Your Mortgage
If refinancing does not make sense for you financially or you are close to paying off your mortgage already, refinancing may not be in your best interest.
Know If You Have Prepayment Penalties
If you are planning on paying off your mortgage early, watch out for prepayment penalties. These penalties may be in your contract that regulates how much you are able to pay off and when. If you pay your mortgage off sooner than expected, you will have to pay a fee to your lender.
While not all mortgages have a prepayment penalty, loans like VA or FHA often do.
Balance Your Financial Responsibilities
When paying off your mortgage with these strategies, it is essential that you not neglect your other financial responsibilities, like student or car loans. You will also need to have a savings account with enough money for emergencies like home repair
If you find yourself falling behind on payments, consult with your lender who will help you find a solution like a repayment plan or forbearance. It is also recommended to contact your trusted financial advisor, who will help you understand your finances and budget.