Millions of Americans have a mortgage that is their biggest monthly expense. Wouldn’t it be nice to get out of debt and eliminate such a large payment?
It’s never easy to pay off a large loan, but the following tips can get you to that goal. Here are some tips for paying off your mortgage with minimal stress.
Make extra payments
Making extra payments regularly can speed up the process of becoming mortgage-free. For example, you could make an extra payment each month or each paycheck.
Whatever strategy you choose, stick to the plan. As a bonus, you’ll build saving muscles as you continue the process. Once you are in a rhythm, saving money will begin to feel like second nature.
You might even become so good at putting away money that you eventually find yourself planning to retire early.
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Make lump sum payments
Making lump-sum payments on your mortgage is a quick, satisfying way to reduce the balance on your loan.
If you choose this approach, consider saving the money in a separate account specifically earmarked for the purpose of making a lump-sum payment. Try to avoid using any of the funds in the account for anything other than paying down the mortgage.
However, if an unexpected financial emergency arises, you will likely face it with less anxiety knowing you have a pool of money you can turn to as a last resort. In other words, the money you save for the mortgage can serve as an additional emergency fund or savings account.
Round up your mortgage payments
Rounding up payments is a simple way to slowly pay down your mortgage. For example, you might round up a $1,400 payment to $1,500 or even $2,000. The more you round up, the sooner you’ll pay off the mortgage.
The great thing about this strategy is that you can easily adjust it as your financial situation changes. When you have more money, you can round up even more. If you are in a cash crunch, you can stop rounding up completely for a while until things improve.
Recast your mortgage
You’ve probably heard of refinancing your mortgage, but you might not have heard of recasting it.
Recasting is similar to a refinance in that both approaches can change the size of your monthly. However, with a recast, you don’t start a new loan. Instead, you keep your current loan and make a lump sum payment toward the balance.
If the lender agrees to a recast, it will recalculate your payments based on the new, lower loan balance. Your interest rate and term do not change, but a recast can be a great option if you have a lot of money to put toward your loan and want to lower your monthly payment.
Refinance to a shorter term
One of the quickest and most effective ways to pay off your mortgage is to refinance it to a shorter term.
For example, if you have a 30-year mortgage, you might refinance and choose a 15-year loan. Your payment likely will be larger, but your interest rate is likely to be lower.
Also, the bigger payments attached to a 15-year mortgage will force you to pay off your loan earlier than you otherwise would.
It requires some effort to refinance, and you will pay some costs. For this reason, a refinance is not for everyone. But if it makes sense for you, the one-time task of refinancing can help you reap benefits for years to come.
Put all extra money toward the balance
If you’re lucky, you might get a sudden influx of cash at specific times of the year. Maybe you get money for your birthday, a bonus at work and a refund during tax season.
If so, consider putting some or all your extra or found money toward the mortgage.
The great part about using extra money to pay off your mortgage is that it won’t negatively impact your day-to-day spending, but can positively impact your future finances.
Start a side hustle
If you are really determined to pay off your mortgage, you could make extra money by starting a side hustle or taking a part-time job.
Once you begin earning money from that gig, use most or all of the funds to pay down your mortgage as quickly as possible.
Taking on another job requires more work on your part today, but the reward could be a debt-free tomorrow.
Make it a priority
It might sound obvious, but if you want to pay off your mortgage, you must prioritize it. It’s easy to get distracted by other purchases or expenses and lose sight of your goals.
On the other hand, if you commit to paying down the mortgage, you must ignore these distractions and stay focused on the prize. Paying down a mortgage involves some sacrifice and spending adjustments. But it will be worth it if it’s a priority for you and your family.
Whether or not you want to pay off your mortgage is a personal decision. Some people firmly believe that it’s wise to be completely debt-free. You might want to invest that extra money or boost your bank account instead.
The choice is ultimately up to you. But if you decide to pay off the mortgage, stay focused. With the right game plan and a clear vision, you can eliminate your mortgage payments and reduce financial stress.