Paying off your mortgage ahead of schedule can save you thousands of dollars in interest. Here are four ways you can become mortgage-free faster.
1. Increase the amount of your payments
Paying an extra $50 a month over the life of the mortgage can save you thousands and shave years off your mortgage. Keep in mind that once you increase your payments, you may not be allowed to lower them until the end of the term. Check your mortgage agreement or ask your mortgage lender to confirm.
2. Keep your payments the same even if you renew at a lower rate
When it’s time to renew your mortgage, you may be able to secure a lower interest rate. Instead of reducing the amount of your payments, keep them the same and you’ll be able to pay off your mortgage faster without any change to your monthly budget.
3. Choose an accelerated payment option
With an accelerated payment option, you can pay off your mortgage faster while still spending roughly the same amount of money on your mortgage each month. That’s because you’ll be making the equivalent of one extra monthly payment per year.
4. Make prepayments
A prepayment is a lump-sum payment that you make in addition to your regular mortgage payments. It reduces your outstanding balance and therefore allows you to pay off your mortgage faster. Read your mortgage agreement carefully to verify the terms and conditions related to making prepayments.
As you can see, planning ahead and adjusting your mortgage payments can be well worth it, and the money you save can be put towards other financial goals, like your retirement. Talk to your mortgage lender about which option might be right for you.