If you are like most homeowners, you don’t own your home outright. Instead, you are making a mortgage payment month after month. You probably dream of that day when you write your last mortgage payment and have full ownership of your home.
There are many strategies that can help you pay your mortgage loan off early and speed the process along.
Paying off a loan, having less debt, and owning your house sounds pretty good, but there are a few drawbacks. Many financial advisors do not recommend that you payoff your home early.
While you are making payments on your mortgage, you are also able to deduct the mortgage interest that you are paying on your taxes. This is reducing your tax liability each year.
Once that mortgage loan is gone, the interest is gone, and you can no longer take the deduction.
Another drawback of paying your loan off early is you lose the access to that liquid cash. If you have the money to payoff your mortgage, you could keep the cash in the bank, earn interest on it, and have fast access to the funds if you have a financial emergency. As soon as you hand the funds over to the lender, you no longer have fast access to it.
But if you have weighed the pros and cons of paying your loan off and have decided to attempt to move forward with it, here are some ways to get it done.
Make an end of year payment
Many people end up with some additional cash at the end of the year. It could be an end of year bonus or just money leftover from your budget for the year. You can use these funds to make a principal only payment on your mortgage.
If you receive steady paychecks from an employer, a few times a year you are probably lucky enough to receive an extra paycheck during the month when there are five paydays instead of four. During those months you can take your extra income and pay it directly onto your mortgage.
Make daily payments
This might sound like a lot of work, but if you pay 1/30 of your payment each day, no interest will accrue, which means you end up paying less in the long run.
If you obtained your loan when interest rates were high, you may be able to take advantage of refinancing your mortgage. Do not access your extra equity, just refinance the same balance you have for the same length that is remaining on your loan if possible.
Your monthly payment will drop because of the reduction in interest, but make sure you continue to pay the same amount as your old payment so you have extra funds going to principal each month.
If owning your home outright is your dream, it is possible to accomplish without waiting for thirty years. Even if you can’t make an extra payment on a regular basis, every time you make even a small payment on the principal, you are helping yourself in the long run.
The more focused you stay, the faster you will be able to pay.