In part one of this blog, we covered the first seven strategies to pay off your mortgage faster. Here are the next tips to get you on the road to being mortgage free!
6. Round your payment up:
If you’re mortgage payment adds up to $1,821 every month, why not round up and write a check for $1,900, or even $2,000 if you can? You won’t even miss the extra money, and every little bit helps accelerate the payoff. You’ll probably find you get in the habit of it and want to round up even more!
7. Check with us about refinancing to a better rate and/or a 15-year mortgage:
Recent surveys have found that almost half of U.S. homeowners could benefit and save money from a refinance, so it’s worth consideration. Ideally, you can refinance into a great low fixed rate on a 15-year mortgage, cutting your time to pay it off in half. Come talk to us for all of your options and you may be pleasantly surprised how much money you can save!
8. If you have a rental property, add the cash flow to your mortgage every month:
If the mortgage in question is actually on a rental property (or you have another rental) and you are cash flowing, you may want to add that surplus to the mortgage every month instead of just stockpiling savings. Your tax breaks will be greater, and delaying gratification will pay off in a huge way once the mortgage balance reaches zero.
9. Contribute “found” money:
Every once and a while, we get some financial good news, like a raise, a bonus at work, an inheritance, the sale of a unneeded car, a CD that matures, etc. Instead of buying more “stuff” with the money or taking a fancy vacation, use this chunk of cash to pay down your loan principal, giving yourself an even bigger gift of mortgage savings!
10. Pay off other “bad” debt first:
Before you even think about paying off your mortgage, you’ll want to pay off high-interest revolving debt and installment loans like credit cards, personal loans, car loans, etc. first, and then start allocating that total savings to pay down your mortgage in earnest. There is good and debt and bad debt, so prioritize getting rid of the toxic credit card and revolving debts that cost you high interest and fees first, and then you can take the amount you paid for those things PLUS the extra you have to allocate and dump it all into your mortgage payoff every month. That financial tactic is called “stacking” or “snowballing” and there’s no reason you can’t go from paying off your credit cards to paying off your mortgage with the same strategy!
11. Pay your first installment before the due date:
When you sign the paperwork on a new loan, whether it’s a refinance or a home loan, the first payment is built into the loan amount so your first payment is usually not due for 31-59 days. Essentially, this allows you to skip one mortgage payment out of pocket. But instead of just enjoying this little savings today, why not make the extra payment(s) to the bank or mortgage lender as if they were due, thereby taking the first bite out of the mortgage principle and accelerating your total payoff.
12. Contribute your tax refund to your mortgage:
If you get any sort of refund come tax time, or have to contribute less than anticipated for quarterly estimated taxes for your business, it’s a great time to allocate that savings toward paying your home off early. Talk to your CPA or tax professional before doing anything with your taxes, but you may even be able to structure it so you have more write-offs from your home AND pay your loan down faster.
13. Don’t overspend on your wedding and honeymoon:
This option won’t be too popular with the brides, but if you look at the numbers, it’s hard to ignore. For instance, did you know that these days, the average wedding costs $26,444 – and much higher in more costly states and cities (i.e. California.) Add that to the tab for average honeymoon and you’re looking at $30 – $40k in most cases. Of course you should still have a wedding, but the marital (and financial) bliss will go on much longer if you allocate a portion of that exorbitant sum to paying off your mortgage faster!
14. Bring your lunch to work, make coffee at home, and eat out less:
Maybe we’re splitting hairs here, as a few dollars saved by bringing lunch to work and making coffee at home can’t possibly make a dent into a mortgage of hundreds of thousands of dollars, right? Wrong. In fact, personal finance surveys show that you can save at least $200 a month just by cooking your own meals and packing your own lunches instead of eating out at work. Add that to the savings by making your own coffee, and maybe institute a rule where you only eat out on weekends, and you might be saving $500 or more every month. If that allows you to pay off your mortgage ten years quicker and save tens of thousands in interest (as an example) it will be well worth it!
15. If you put less than 20% down, still save as much as you can:
Maybe you opted for a federally backed loan like FHA, VA, or a similar mortgage that allowed you to put 3% down. If that’s the case, it’s a good idea to still put aside as much money as you can commit when you buy your home, not to put toward a down payment but as a lump sum to pay toward your mortgage. Not only will you reduce the interest charges exponentially by doing this up front, but you’ll possibly eliminate the need to pay the mortgage insurance that comes with these loans in shorter time (ask us for details).
Or, you can put that money aside as an investment, running parallel to your mortgage but gaining a rate or return and actually earning interest, to be paid into your mortgage at a later date when you feel more financially comfortable.