Paying off your mortgage faster may feel like a daunting goal, but it offers a wealth of benefits no matter when you achieve it. For starters, you can save thousands of dollars in interest payments, whether you shave off two years – or twenty – of your loan term. It also offers an incredible peace of mind, knowing you have greater financial security, and you won’t have to manage a monthly mortgage obligation.
No matter how quickly you want to pay off your mortgage, Peoples National Bank of Kewanee (PNB)’s mortgage lenders have put together a few reliable strategies you can start using today.
How To Pay Off a Mortgage Faster
#1. Make Bi-weekly Payments
One of the simplest ways to pay off your mortgage faster is by making bi-weekly payments, versus monthly payments. With this strategy, you make 26 half-payments per year, which equates to 13 full payments annually. Adding this extra payment can reduce the length of a 30-year mortgage by about four to six years, depending on your current interest rate.
#2. Round Up Your Payments
Rounding up your mortgage payment to the nearest hundred, or even thousand, can make a big difference over time, especially when you apply the roundup to the principal (and not the interest). For example, if your mortgage payment is $1,575, rounding it up by $50 and putting it towards your principal can shorten the length of the mortgage by 16 months, depending on your interest rate.
#3. Make Extra Principal Payments
You can also make additional payments directly toward the principal at any point, whether it’s monthly, quarterly, or annually. Like rounding up a payment, the key is making sure any extra payment is applied to the principal and not future interest.
#4. Refinance to a Shorter-Term Loan
Refinancing to a shorter-term loan, such as a 15-year mortgage through Peoples National Bank of Kewanee, can significantly reduce the time it takes to pay off your mortgage. While the monthly payments will likely be higher, you’ll pay less interest over time thanks to a lower interest rate and shorter term length.
#5. Put Unexpected Financial Gains Towards Your Mortgage
Unexpected financial windfalls, such as tax refunds, bonuses, or an inheritance, can offer a great opportunity for paying down your mortgage faster. This can make a significant dent in your mortgage balance and accelerate your payoff timeline.
#6. Review and Redirect Savings
Make a point to examine your current lifestyle and look for potential financial swaps, such as eating out a little less each month or canceling unused subscriptions. Once you make simple lifestyle changes where possible, you can redirect the savings to your mortgage. Even adding a small amount to your mortgage principal each month can compound over time and help you pay off your mortgage faster.
Learning how to pay off your mortgage faster – and putting it into practice – can seem overwhelming, but a few simple strategies may be all you need to achieve your goal. Remember to create a plan, track your progress, and celebrate milestones along the way so you stay motivated. Don’t forget the mortgage lending experts at Peoples National Bank of Kewanee are always available to offer guidance in your mortgage journey.