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Simple Ways to Pay off your Mortgage Faster
Paying off debt frees up your income for more productive uses.
Although it's important to pay off high-interest credit card debt as
quickly as possible, it's also advantageous to take care of your
mortgage in a timely manner. Whether it's through refinancing to a
lower interest rate or putting a little bit extra towards your debt
each month, there are numerous ways to pay down your mortgage faster.
Pay a Lump Sum
One way to chip away at your debt is to pay a high lump sum whenever
you come into any extra money. This could come in the form of an
inheritance, a tax refund, or a small windfall from selling stocks.
Rather than putting this money into savings or paying for a holiday,
you could put a portion of it towards your mortgage. A single $5,000
payment could reduce your repayment term by a whole year, depending on
your loan terms.
Take Advantage of Low Interest Rates
Interest rates have been historically low in recent years, so if your
mortgage is older, you might wish to refinance to lock in a lower
rate. If you plan to stay in your home for several more years, it's
worth asking your lender about their lowest refinancing rates. You can
then compare this information to offers from outside lenders to find
the best option. Generally, if you can reduce your interest rate by at
least 1%, it will be worth your while to refinance. You'll need copies
of your asset information, prior tax returns, proof of investments,
and a proof of income to get started.
Refinance to a Shorter Repayment Term
Another reason to think about refinancing your mortgage is to reduce
your repayment period. If you currently have a 10 year fixed-rate
mortgage, you might want to consider switching to a 7 year plan
instead, if you can afford it. With lower rates, you may be able to
pay off your loan much faster without increasing your monthly payments
too much compared with your current plan. Paying off your loan a few years
earlier can save you heaps of interest.
Rent out a Room
Rounding your payments up to the nearest whole number is a simple way
to pay off your mortgage faster without feeling the squeeze. If your
current payment amount is $923.46, for example, you could pay an even
$1000 per month. Those who have a spare room in the house might want
to think about temporarily renting it out to facilitate these higher
mortgage payments. There are many short term renters in need of
houses for rent who
could help you round up payments and rid yourself of your mortgage
faster. Taking a side job is another option.
Sign up for Biweekly Payments
If you're not willing to commit to the process of refinancing or
renting out a room, another way to pay down this debt faster is by
arranging to pay half of your monthly payment every two weeks, rather
than a single payment once a month. Biweekly payments can remove
nearly six years from a 30-year mortgage, saving you thousands in
interest.
These are just a few ways to take charge and pay off your mortgage in
a timelier manner. The sooner you can rid yourself of this debt, the
more money you'll have to save for retirement or invest in other
endeavours. Some lenders will charge fees for early repayment, so it's
important to read all terms and conditions carefully before you take
action.
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