Many mortgage lenders offer flexible repayment terms not seen in the past, including 10, 15 and 20 year repayment options in addition to the traditional 30 year mortgage loan. With mortgage loan interest rates at near historic lows, paying off your loan early doesn’t have the huge incentive it used to when mortgage rates were high, even for those individuals with great credit; but, paying off your loan early can still save you thousands over the lifetime of your loan, or even more!
Although there many ways to pay off your loan early, and different strategies that people employ based on their individual financial situations, we’re pulled together 3 of the easiest and most effective ways to pay off your mortgage loan early.
Round up your monthly mortgage payment
Maybe you’re in the habit of doing this on other bills already. If so, why not on your mortgage too? If your mortgage payment on a $250,000 loan is $1,172 a month, if you round that up just $28 a month you’ll save more than $8,500 in the long run (on a 30 year mortgage) – and you’ll pay off your loan more than 7 months early!
Refinance your 30-year mortgage for one with a shorter term
The best intentions don’t always translate into actual action – maybe you’ve thought about paying extra on your loan one month, or planned to spend half of your holiday bonus from your employer on paying down your mortgage, but found that something always comes up, impeding your progress forward. One way to “force” yourself to pay extra each month (in an amount you can afford) is to refinance your existing mortgage loan into a shorter overall term.
Pay your mortgage on a biweekly basis rather than monthly
This is one of the easiest ways to pay more towards your mortgage without much effort. Simply divide your monthly mortgage payment in half, and pay each half on a biweekly basis. No extra payments to make, nothing extra out of your pocket each month. But, at the end of the year, you’ll end up having made an extra mortgage payment because while there are 12 months in a year there are 26 weeks – which comes out to 13 months! This can be an especially easy method if you are paid biweekly and can set your mortgage payment to be automatically deducted from your take home pay each pay period.