Most Americans spend 20 to 25 percent of their income on their mortgage payment each month. This is usually one of the highest expenses in a budget. And while you’re paying off a mortgage it can be hard to focus on any other projects that require capital. For this reason you’d want to pay off your mortgage sooner. By doing this not only do you save because of all the years of interest you’ve avoided but you’re also creating equity in the home quicker.
If you decide to sell your home in future then you’ll get most of the payment (if not all). Equity can also help you get financing for other endeavors as it can be seen as “collateral”. If this sounds at all appealing to you, then read on to find out what you can do to pay off your mortgage sooner.
Set Aside Your Tax Refund
If you’re one of the many taxpayers who receives a refund each year, consider setting aside some of this refund to reduce your outstanding mortgage balance. Some taxpayers may have such a sizable refund that it can account for two or more mortgage payments. However, even a few hundred dollars extra put toward your principal balance will save you a considerable amount of money in interest charges and will help you achieve your end goal – to pay off your mortgage sooner.
Set Up A Draft Or Increase Your Auto Payments
Simply adding $50 extra to your payment can make a large different. You have can do it one of two ways. Either create an automated draft from your checking account to a fund you’ve created, or increase your automated payments to the lender.
Using the aforementioned amount, if you were to give $50 extra a month on 10 year $150 000 mortgage you’ll pay it off 14 months sooner. $100, would be 18 months sooner and $150 nearly 2 years sooner.
Use Your Bonus
If your performance appraisal went well then you could expect to receive a bonus. Instead of spending it on the usual short lived expenses like luxury items, gifts, vacations, really whatever you can think of. Be smart with your money and spend it on paying down the principal balance on your mortgage. If you’ve created the fund like we suggested in tip 2 add this money to it.
Paying off your mortgage sooner means you’ll have fewer financial obligations sooner and can live life freely. Following these tips can help you accomplish this rather quickly, certainly quicker than you think.