Ways to Pay Down Your Mortgage Quicker

 

Do you have a mortgage to pay off? Who doesn't want to get out of debt quicker? Here are some ways you can pay off your mortgage quicker. At the end, you are now the proud and sole owner of that asset.

 

1. Increase your monthly payments

 

This way, you can reduce the principal amount as well as the resultant interest payments. Closely monitor your payments and see them dwindle down to more manageable levels.

 

2. Use tax refund checks or other lump sums for mortgage payment.

 

If you come into a nice lump sum from a refund, bonus, inheritance, or other sudden income, consider using it to pay down your mortgage.  Of course, if you have other loans on which you’re paying higher interest rates, pay them first.

 

Consider this.  In the beginning of your mortgage, most of the payment goes towards interest, very little goes toward the principal.  At the end, it’s reversed.

 

So, if you have a $200,000 mortgage at 7% interest, in the first month, only $164 goes towards principal, $1166 goes towards interest.  If you pay just an extra $1000, you will have eliminated about 6 months worth of mortgage payments from the back end, so you’ve spent $1000 to save almost $8000.  Quite a good investment!

 

3. Paying monthly? Why not pay more frequently?

 

You may have the option to pay off the mortgage on a more frequent basis, such as bi-weekly (every two weeks). If you pay half the monthly amount every 2 weeks, you'll be making 26 half-payments every year, which would bring the principal amount down more quickly, and you'll be able to pay off your mortgage much quicker.

 

4. A simple tip: round off your payments up to the nearest hundred or thousand.

 

Rounding off to nearest hundred or thousand can reduce the interest payment you will make during the entire period. That means savings from interest payments that do not seem so hard to do i.e., loan amount is $1,275, why not pay $1,300 and see the difference in the interest payments you need to make.

 

5. Can you afford to pay in lump sum?

 

Paying in lump sum means that the principal amount of the mortgage is reduced. Thereby, interest computations will also be reduced. This accelerates your mortgage paying period.

 

6. Even when the mortgage rates have fallen, still make the same payments