If you have a 30-year mortgage, you probably imagine yourself on the verge of retirement when you pay that final installment. It doesn’t have to be that way. With a flexible approach to financing and creative thinking, you can retire your mortgage long before that 30-year deadline.
Our real estate agents work with many homeowners in the area. While some are content to keep their existing mortgage contracts, others jump at the chance to eliminate their debt as quickly as possible. Your decision to change the way you pay off your home should be based on the certainty of improving your financial future.
To help you decide what’s best for you, we want to share our ideas for paying off your mortgage at the speed of light.
- Refinance over a shorter period
If you financed your home with a 30-year mortgage, a shift to a 15-year contract will cut your time commitment in half. It will also increase your monthly payment but that won’t be as much of a financial strain as it might seem. A major benefit of a 15-year mortgage is its lower interest rate. When you commit to paying off your mortgage in half the time, your payment is larger but the reduced interest means it won’t be twice as much.
- Pay extra on your principal
If you prefer not to refinance your mortgage, you can still pay your home off fast by regularly paying more than your planned installment. Once you’ve met your monthly mortgage obligation, any extra amounts you pay go directly toward reducing the principal.For example, if you add an additional $100. to your $900. monthly payment, in one year you will have paid an additional $1200. Those extra payments total $24,000. over 20 years and they reduce your total interest as they the lower your principal.
- Refinance at a lower rate for the same period
If you’re considering a transition to a 15-year mortgage just to get a better interest rate, you might not have to. All Mortgage rates fluctuate. Your refinance might allow you to get a better rate while keeping your 30-year terms. This move should reduce your total interest and your monthly payments. If you want to pay off your mortgage faster, you can continue to make the original payment.
- Reduce your principal with “found” money
Before you receive any unexpected cash, make a commitment to use it to reduce your mortgage balance. Then when you receive a bonus, an unexpected raise, a bequest from a long lost relative, or other found money, you won’t have to think twice about how to spend it. Instead of blowing cash on a new electronic toy or stuffing it in a low-interest savings account, you’ll know to put your found money to work reducing your mortgage payoff balance.
- Create a flexible mortgage paydown plan
If you want to pay your mortgage off quickly, the key is doing something instead of doing nothing. If you can’t commit to one of the above ideas, create a flexible mortgage payment plan that works with your personal finances.You can refinance when interest rates are right and/or double up your payments when you can. You can pay additional amounts toward your principal when you have the extra cash and do the same when you receive an unexpected influx of money.
We Can Help
When you need information about paying your mortgage off quickly, our real estate professionals can help. Contact Columbia Real Estate if you’re buying or selling your home or if you want reliable information on home mortgages.