How to Pay Off Your Mortgage Faster
Working as a Brooklyn mortgage lender, a number of clients often ask the question “How can I pay my mortgage off faster?” Taking out a mortgage is one of the biggest financial commitments you will make in your life, and it makes sense that some are looking to get rid of it faster. Paying your mortgage off faster has some benefits, such as eliminating a large debt, and freeing up your money to use on other things. Here are some tips on how you can pay your mortgage off faster.
Put Extra Funds Towards the Principal
Your interest rate is calculated based on your principal, or the amount of money you have borrowed. If you look at your amortization schedule, the principal and interest are separate. You can see just how much of those monthly payments are going towards interest and towards the principal. If you make some extra payments to put towards the principal, you will, in effect, lower the amount borrowed, which then lowers the interest rate, allowing you to pay down the mortgage quicker.
Consider making Bi-weekly Payments
Most mortgage payments are made once a month. Many people don’t realize that, by splitting their monthly repayment into 2 bi-weekly ones, they can pay their loan off quicker. You’re probably wondering how that works since you are paying the same amount monthly. Basically, it works out that you are making extra payment for the year. That extra is then applied to the principal, which lowers your interest, thus speeding up the repayment process.
An alternative to this is to send an extra month’s payment in, making sure it is applied to the principal. This can actually take 7 years off off your mortgage term.
Saving for the Principal
If you aren’t in a position to make that extra payment a year, you could save what you have leftover each month and then apply that amount to the principal. Even if you are adding an extra $50 a month, or just rounding up your actual mortgage repayment amount, it will all help to lower your mortgage term.
Refinance Your Mortgage
Refinancing your mortgage is another way to get your loan paid off quicker, and it eliminates debt. Refinancing will help lower your interest rates, and you can opt for a loan with a shorter term if you really want to speed things up. Those monthly payments may be a bit higher, however, they can cut your interest rate costs by about 50%.
Try Recasting
In recasting, you are taking a lump sum and paying that towards the principal. The mortgage is then recalculated based on your new balance, also known as re-amortizing. This will not only lower your payments, but it will also keep you on the same term. From there, you can carry on making your usual monthly payments and apply what you are saving to the principal, further cutting down the time it takes to pay off your mortgage.
Go for a Flexible Mortgage Term
This is an option for when you are opting to refinance. Shop around for a lender that has flexible term mortgages, which can give more options than the tradition 15 to 30 years. Choosing a term time that is shorter means you are paying less interest over the course of the loan.
Opt for an Adjustable Rate
A lot of people shy away from mortgages with an adjustable-rate option. However, if you’re are financially stable, it can be a really good option towards paying your mortgage off faster. It works by building the equity up in your home quickly while freeing up cash in the process. The money you save can also be put towards the principal to quicken the pace even more.
If you have questions about refinancing or paying off your mortgage, give our Brooklyn mortgage lenders a call!
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