One of the most expensive purchases you’ll make in your lifetime is your house. Having a steady monthly mortgage payment is probably one of the most depressing things that you’ll experience in your life.
If you have an extra amount of money, then it’s possible to pay off your mortgage early. However, it’s important to consider the various factors that go into making a successful early payment.
One way to pay off your mortgage more effectively is by refinancing your loan. According to the experts at SoFi, “Refinancing could help you save money over the lifetime of your mortgage.” Before you refinance home loan, check out these tips for paying off your mortgage effectively.
1. Find Extra Room in Your Budget For Payments
One of the most effective ways to reduce your monthly mortgage payment is to pay more than the amount due. This may seem obvious, but it can go a long way.
For instance, if you want to reduce your monthly mortgage payment by $20, you’ll need to cut out one or two fancy coffees a week. Having extra money to pay for these expenses will result in even more savings. Although it’s important to reduce your mortgage payment, it’s also important to keep in mind that doing so won’t affect other financial goals.
2. Schedule Extra Payments
If you’re not able to come up with the extra money to make more monthly mortgage payments, then schedule two or three well-timed payments throughout the year.
If you’re expecting a $1,200 bonus from your tax return or work, then take the $1,200 and apply it to your mortgage principal. You’ll be able to see a significant reduction in your loan balance in a few years.
3. Refinance Your Loan
Many people who are mortgage borrowers prefer to have a longer repayment term, which typically means that they’ll have to make monthly payments for 30 years. However, as their income grows, they may start to have more cash flow.
If you’re considering a shorter repayment term, then a mortgage refinance could be beneficial for you. It will allow you to reduce the monthly payments and save a lot of money on interest. However, it’s important to note that this method will likely increase the monthly payments, so make sure that you’re getting the best possible deal.
4. Recast Your Mortgage
Although mortgage refinancing is commonly used, you may not have heard of mortgage recasting. This process involves making a lump-sum payment to the lender to reflect the new balance. Usually, a loan must have a minimum of $5,000 to be re-written.
Refinancing will allow you to lower your monthly payment and save money on interest. It’s also beneficial for you as it allows you to pay off the loan early. Having the savings combined with larger monthly payments will allow you to make a larger monthly payment.
Getting rid of a mortgage early can save you thousands of dollars in interest. It can also offer peace of mind as it eliminates the risk of losing a home in the future.
