Paying off your mortgage can seem like an impossible task, but it doesn’t have to be. By making a few simple adjustments, you can significantly reduce the amount of time it takes to pay off your mortgage and save yourself thousands of dollars in interest charges.
The first step to paying off your mortgage faster is to put extra money toward your mortgage. Your mortgage contract may allow you to make prepayments, also known as prepayment privileges. You can find out about your prepayment options by checking your mortgage contract or contacting your lender.
Increasing the amount of your payments, even by a small amount, can help you pay off your mortgage faster. However, you may only be able to increase your payments by a certain amount each year. Make sure you check your mortgage contract for the specific amount. If you increase your payments by more than your prepayment privilege allows, you may have to pay a penalty.
It’s important to note that once you increase your payments, you may not be able to lower them until the end of the term. The term is the length of your mortgage contract, including your interest rate and other conditions. The term can range from a few months to 5 years or longer.
Another way to pay off your mortgage faster is to make a lump-sum payment on top of your regular mortgage payments. Again, check your mortgage contract for the specific amount you can put toward your mortgage. If you put more money toward your mortgage than the maximum amount allowed, you will pay a prepayment penalty. It’s crucial to read your mortgage contract carefully and make sure you understand the details about penalties.
If you’re looking to reduce your prepayment penalties, consider renewing your mortgage when your term ends. You may be able to get a lower interest rate, which will ultimately save you money in interest charges. Some mortgage lenders may even allow you to extend the length of your mortgage before the end of your term, known as the blend-and-extend option.
With this option, your old interest rate and the new term’s interest rate are blended. When your interest rate is lower, you have the option to reduce the amount of your regular payments. If you decide to keep your regular payments the same, you can pay off your mortgage faster.
Finally, consider an accelerated payment option. This option lets you make weekly or biweekly payments, which puts more money toward your mortgage than with a monthly payment. By accelerating your payments, you make the equivalent of one extra monthly payment per year, which can save you money on interest charges.
Paying off your mortgage faster can seem daunting, but by making a few simple adjustments, you can significantly reduce the amount of time it takes to pay off your mortgage. By increasing your payments, making lump-sum payments, renewing your mortgage when your term ends, and considering accelerated payment options, you’ll be on your way to a debt-free future.