There are four simple ways that you can pay your mortgage off faster.
- Make biweekly payments – Rather than making one monthly payment, you can make half the payment every two weeks. If your mortgage payment is $2,000 a month, you would pay $1,000 every other week. Because there are 52 weeks in a year, a biweekly payment schedule will result in the equivalent of 13 full monthly payments per year. The extra payment that you’d be making each year can help you pay your mortgage off 5 years sooner and eliminate 5 years of interest as well.
- Make extra principal payments – Most mortgage lenders allow you to make an extra payment every month and mark it “principal only”. This payment will go directly to pay down the principal (the house itself), rather than both the principal and interest.
- Refinance into a shorter-term loan – If you currently have a 30-year mortgage, refinancing it as a 15-year loan will help you pay it off in half the time, potentially at a lower interest rate as well.
- Put unexpected money you receive into your mortgage payments – If you put the proceeds of tax refunds and annual bonuses towards the principal of the loan, you’d be pleasantly surprised at how quickly you can pay off your mortgage.
There are two key benefits to a 15-year mortgage versus a 30-year mortgage. A 15-year mortgage carries a lower interest rate, which means that the overall interest you’ll pay on the principal balance of the mortgage is lower. The second benefit is that you’ll pay off your mortgage in half the time. By paying interest for only half the amount of time, you’ll end up paying significantly less interest overall.
With this handy calculator, you can gauge your potential new monthly mortgage payment in seconds, and ensure you’ll have enough money left to cover the rest of your living expenses. Choose your rate and term—you might be surprised to see how affordable it is to own your home sooner than you thought possible. Note how much interest you’ll pay over the life of the loan, and then enter prepayment amounts to calculate their impact on your overall expenditure.