What Is the Quickest Way to Pay Off a Mortgage?
You don’t have to wait 30 years to be mortgage-free. While it’s possible to pay your mortgage off quickly by putting all your extra money into it, you can use other strategies to speed up the payoff that have a less dramatic effect on your life.
Just Pay Extra
The simplest way to pay your mortgage off quickly is to send extra money to your lender every month. Be sure to have the money applied to your mortgage principal instead of toward your next payment. Paying an extra $100 per month would pay your mortgage off sooner and could save you hundreds, if not thousands.
Some mortgage lenders offer a bi-weekly payment option. With a bi-weekly payment, you pay your mortgage every other week, making 26 half-payments per year, the financial equivalent of 13 monthly payments. If you get paid every other week instead of twice a month, this option may be a good match for you, since it could line up with your paycheck. The key benefit of a bi-weekly payment is the extra payment you are making each year. Over the course of a 30-year mortgage, you could end up paying off your mortgage in about 25 years. Confirm the terms before setting this up as some lenders charge for this service.
Another way to pay your mortgage off more quickly is to refinance it to a shorter term. In addition to setting you up for a faster payoff, a shorter term mortgage usually means a lower interest rate and higher payment. You’ll likely have a higher monthly payment with a 15-year loan, but you still save money by not paying for the interest that would normally accrue over a 30-year period.
Reduce Other Debt First
As tempting as it is to pay off your mortgage as quickly as possible, because it is likely your largest loan, realize that it makes the most financial sense to pay off debts with the highest interest rates first. Once those other debts are paid off, you can take the money you were using to pay them down and apply it to your mortgage.
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This article is provided for general guidance and information. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal or financial issues involved with credit decisions.
Published by permission from ConsumerInfo.com, Inc. © 2013 ConsumerInfo.com, Inc. All rights reserved.