5 ways to pay off mortgage early
If you have decided to pay off mortgage early, here are the 5 ways to pay off mortgage early.
Pay a lump sum toward principal
The most straightforward way to pay off mortgage early is to just put a lump sum toward the principal.
Paying a lump sum toward the principal will immediately reduce the monthly mortgage interest as it is calculated based on the remaining principal balance.
Find out how a lump sum payment toward the principal will affect your interest and loan duration with this mortgage payoff calculator.
Make additional payment every month
It is amazing how an extra $100 per month toward your principal could save you in months of payments, or even years.
Some mortgage companies even have tools to help you estimate the impact of additional payments on the duration of your loan.
Check out how additional payments affect your loan duration with this mortgage payoff calculator.
Make bi-weekly mortgage payments
Instead of making monthly mortgage payments, you can choose to make bi-weekly mortgage payments. Making biweekly payments will result in additional payment for your principal balance.
For example, instead of paying $1,000 monthly, you can make bi-weekly payments of $500 each. After 1 year, instead of 12 payments of $1,000, which equals $12,000, you will have made 26 payments of $500, which equals $13,000. You will have made additional amount equal to one month mortgage payment.
Check out how bi-weekly mortgage payments can affect your loan duration and interest saved with this mortgage payoff calculator.
Get a 15-year mortgage loan instead
Instead of getting a 30-year fixed mortgage loan, you can get a 15-year mortgage loan. Paying extra per month and you can save a lot in interest and pay it off 15 years early!
Not sure about whether you should pay it off early? Check out the pros and cons of paying mortgage off early and not paying it off early.
Refinance into a 15-year mortgage loan
But what if you already got a 30-year fixed mortgage loan? No worries. When the rate is low and you meet the requirements, you can refinance your 30-year mortgage loan into a 15-year mortgage loan and pay it off sooner.
Why 15-year mortgage loan? Why not just making additional payments per month? It is because 15-year mortgage loan usually has lower rate than 30-year mortgage loan. Therefore, you save money right from the start.
Not sure about whether you should pay mortgage off early? Check out the pros and cons of paying mortgage off early and not paying it off early.
