![]() ![]() That’s a pretty big difference, for less than the cost of a nice dinner on the town each month. What if you have that same $200,000 mortgage at 5.5% interest? Maybe you decide not to refinance (perhaps because rates are higher today than when you took out your first mortgage), but instead just put extra money towards your mortgage each month.Īdd only $50 per month to your mortgage payment, and you’ll pay it off in just over 27 years, saving about $24,162 in interest. ![]() Pay extra each monthįifty bucks might not be much in your budget, but consistently adding this much to your mortgage payment can make a big difference. If you aren’t expecting to see your income increase anytime soon, this strategy might not be the best option to start with. This strategy works best for those who get regular raises over and above the minor cost of living adjustments. If you’re already leading a comfortable lifestyle and can avoid lifestyle inflation that often follows a raise, you can put your whole raise amount towards your mortgage balance. In other words, if you’re currently putting 15% of your income towards your mortgage payment, 15% of each annual raise amount should also go toward your mortgage, in addition to what you’re already paying. The goal is to put the same percentage of your income toward your mortgage, even when your pay goes up. ![]() One way to find extra cash to put toward your mortgage: apply for raises and bonuses from your job. Learn More: Retiring Early? Why You Should Pay Off Your Mortgage First 3. We’re currently on a rising rate schedule, meaning new rates are higher than old rates and your chances of locking in a lower monthly payment by refinancing to another 30-year mortgage are not good.įor now, it is probably best to wait until mortgage rates cool down and then when you see rates lower than your current mortgage, considering locking in a refinance. Unfortunately, while this method is probably the most common way to pay off your mortgage early, it’s also going to be more expensive in today’s rate environment. This calculator allows you to plug in the details of your current and future loan to show you how much you stand to save every month. Just how powerful this option could be depends largely on your current interest rate and your new interest rate. That means you have more budget flexibility and can pay more towards your mortgage principal each month without ever-increasing your payment. This has the same result as making extra payments each month on your current mortgage but gives you a lower required payment. But if you refinance, you can double up by reducing your interest rate and continuing to make the same monthly payment. Many who refinance do so to reduce their monthly payments. But if you’re currently working on other competing financial goals, refinancing to a shorter term may not be your best bet. If you have plenty of room in your budget to cover the increased payments, it might be. Then, if your income fluctuates for any reason, you may struggle to deal with the higher mortgage payment.įor this reason, you should definitely take time to consider whether or not refinancing a 30-year mortgage 15 years is the best option for your needs. Plus, you’ll have to deal with the actual costs of refinancing. When you refinance to a 15-year mortgage, you’ll get stuck in the higher payment. With a 30-year mortgage, you have lower payments, but you could always pay extra to get out of the loan sooner. What’s the downside of this option? You get locked into a higher monthly payment, which gives you less flexibility in your budget. Refinance to a 15-year mortgageĪn easy way to guarantee that you’ll pay off your house twice as fast is to refinance your mortgage from a standard 30-year term to a 15-year term. If your budget allows, consider using a combination of these approaches to really hit that debt hard. Either way, any of these options could save you money in the end and help you reach financial freedom faster. Others will cut just a few months or years off of the debt. Some of these options will have you paying off your mortgage a decade or more early. You might get out of a year’s worth of payments (or more) simply by throwing a bit extra toward your principal each month. Since your mortgage is such a large, long-term debt, it can be surprisingly easy to pay it off at least a little early. But for some who have tackled many of their big financial goals and erased other debt, putting their home mortgage in their crosshairs can make sense. The decision to pay off your mortgage early is a controversial one. ![]()
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