The faster you pay off your mortgage, the less interest you have to pay, and that means the cheaper your home will be. Of course, if you’re on a fixed income, it may seem impossible to bump up the amount you are paying into your mortgage each month, but there are steps you can take to pay off your mortgage faster. Here are five tips to help you pay off your mortgage early:
Refinance – While this might sound like the opposite of paying off your mortgage faster, if you bought your home ten years ago and haven’t refinanced on post-recession rates, you can potentially be offered a much lower interest rate. Once you’ve gotten that new rate, however, continue making the payment you made with the higher rate. For example, if your previous monthly payment was $1800 and you refinance so that your new payment is $1500, keep paying the $1800.
Make an extra payment – Every three months, six months, or twelve months, make an extra mortgage payment. For example, if you pay $1500 every month to your lender, save a hundred dollars or so from your budget every month and make an additional $1500 payment at the end of the year. These payments can start to add up—paying thirteen months’ worth of rent every year over thirty years can shave years off of your mortgage.
Devote windfalls to your mortgage – When you get your tax refund or any other financial windfall, put it directly towards your mortgage principal. While it might be tempting to run out and spend it on new clothes or a vacation, a big tax return, winnings, or monetary gift can put a serious dent in your mortgage payments.
Round your payments up – If you are paying $1315, start paying $1400. This small adjustment to how much you pay, which is unlikely to stretch your budget too far, can tangibly shorten the length of your mortgage.
Rent out extra rooms – If you have a spare bedroom or other unused room in your home, renting out this room can be a great way to get some extra funds, which you can then directly apply to your mortgage. If you charge $700 rent and add that to the $1500 you are already paying for your mortgage, you can reduce your mortgage’s length by a factor of five or more years.