Are you looking to pay your mortgage faster? Being mortgage-free has its benefit including peace of mind knowing your home is yours.
Financial planning might be relatively easy for you, but dealing with the burden of a mortgage can easily turn into a headache. The housing market just by the third quarter of 2020 has seen an increase of 84.5% in mortgage refinancing, which shows that the financial crisis drove people into more debt.
Amongst the types of debt you accumulate during your lifetime, the mortgage is the hardest to pay off as it often takes up to 30 years to get rid of it. If you want to pay your mortgage faster, then keep on reading to find out 5 ways that can help you out.
Why Should You Pay Your Mortage Faster
Nothing feels more like a financial burden than a monthly payment that lasts for decades. You’ve probably felt the frustration of owning a house, but not having paid for it entirely. Paying your mortgage faster will take this burden off your shoulders in a shorter period, so you can achieve your financial freedom by the time you’ve retired.
While getting rid of your debt faster can bring your peace of mind, you also need to evaluate if you can afford to do this without repercussions. If you barely get by from month to month, then this is something you might want to consider at a later time when your financial situation will improve. Always check in with your budget and evaluate your options early on before deciding on doing this.
Five Ways to Pay Your Mortgage Faster Without a Financial Advisor
1. Make higher repayments when you can
Sometimes you don’t have a fixed income every month, or your spending can decrease. You can put the money in your emergency fund but you can also add it to your mortgage repayments.
You can also round up your repayments every month to help you put more money into your mortgage payoff. For example, if your monthly mortgage payment is $2,400, you can round it up to $2,500. It might not seem like a lot but over time it will surely make a difference.
2. Put your extra money in the mortgage repayments
If you commit to paying your mortgage faster, then you should consider adding all the extra money you make in the mortgage repayments. The extra money can come from a work bonus, an inheritance, your tax refund, or from selling different items or investments. While most people decide to spend a big part, if not all of the extra money on luxuries, consider putting it in your mortgage as an investment into a debt-free future.
3. If your interest rate decreases continue to pay the same amount
On June 23 of this year, the interest rate for 30 years fixed-mortgages has decreased by 0.047% according to a Money article. Decreases and increases in interest rates are normal since the market always fluctuates.
While you might be happy that your monthly repayment is getting lower, you have to remember the commitment you made to pay your mortgage faster. So instead of paying the new decreased amount, continue to pay the same amount as before. This way you’ll add extra money to your payment down the line. This may only apply to variable-rate mortgages.
4. Commit to a yearly extra repayment
If adding extra money to your monthly mortgage payment is not something you’re comfortable with, try to commit to a yearly extra repayment. You can choose any time of the year to do this but it would be easier to do it when you know you’ve got some extra money coming in. For example, when your tax return comes in or when you get your Christmas bonus. In 12 years of doing this, you’ll have paid one year of your mortgage in advance.
5. Cut down on your nonessentials
This might feel more of a sacrifice, and in some ways it is, but keeping your goal in mind can help you see it more as an opportunity for getting rid of debt faster. Evaluate how much money you spend on nonessential things monthly, and think about which of those things you could do without. For example, cut down on ordering food and try to cook more often, cancel subscriptions you no longer use regularly and only buy what you need. Learn more ways to lower household expenses here.
The money you get from cutting these expenses down should now go towards your mortgage repayments. That doesn’t mean you should no longer indulge in any luxury, but rather be more prudent of how often you do this. The rewarding feeling you’ll have once your mortgage debt decreases will make it worth your small sacrifices.
Need help with tracking your expenses and getting alerts? Consider apps like Mint and Truebill to help you stay on top of your expenses.
As a final thought, keep in mind that each small step you do to get rid of your debt counts down the line. Find the solutions that best work for you and keep your eyes on the prize: financial freedom.