Make bi-weekly payments
Making payments every two weeks can slash 15 years off your mortgage term and save you from paying thousands in interest. However, Nerdwallet warns against turning to third-party services as they usually come with setup fees and monthly fees, which may negate the effect of bi-weekly payments. Instead, talk to your bank about your options or make an annual deposit equivalent to 12 months of your mortgage payment at the end of each year.
Understand what you’re paying for
Mortgage rates vary from state to state and interest rates are pretty much locked on a national level. However, local factors still have a significant impact on the overall cost. Booming local economies cause lenders to increase rates, which means you may need to pay more if you live in cities like Boston or Washington, D.C. Some states also impose unique taxes. In New York City, a post by Yoreevo reveals that mortgages with initial loan balances of less than $500,000 are taxed 2.05% of the initial mortgage principal, while those above $500,000 have to pay a 2.8% mortgage recording tax. While this particular tax is included as part of the closing cost, it can trip up those who have not budgeted for it. The moral of the story is to always double check with your broker for any hidden costs.
Refinance your mortgage
If you realize that you can easily pay off your mortgage within half the allocated time, consider refinancing your mortgage. The Balance emphasizes that you must get the same terms in your new plan so you’re not paying for higher rates before you refinance. This option does come with additional costs, but it can save you from paying thousands in interest in the long term.
Put extra cash into your mortgage
When you review your finances, you may realize that you have extra cash every month. Instead of using it on other things, why not put the extra money into your mortgage? The Seattle Times suggests doing this if you have a sudden cash influx from things like bonuses or tax refunds. You’ll be surprised by how much money it can save you down the line.
Refine your budget
In line with the previous point, refining your budget can go
a long way. If you allocate for an extra payment of, say, $500 every month,
you’ll be forced to find that from somewhere else. Maybe you have a weekly trip
that you don’t really need to take or you eat out too often. There’s always
something in your budget you can reduce or eliminate to free up some money to
pay your debt.
On
HomeZada we pointed out that paying off your mortgage balance might seem
like a dream, but it’s not impossible if you make an effort to live within your
means. Sticking to your budget is important as it’s one sure way to help you
live debt- and mortgage-free.
