3 Ways to Pay Off Your Mortgage Early
You can remove years from your mortgage payment schedule and save money on interest by paying off your mortgage early. However, before you do so, ensure that your mortgage has no prepayment penalty AND that it makes financial sense for you right now (or if you would be better off waiting a little longer).
Here are 3 ways you can pay off your mortgage early:
1. Make an Extra Mortgage Payment Each Year
You may be able to opt to make your mortgage payment every two weeks (biweekly), where you pay half of your mortgage payment instead of one full payment. There are 52 weeks in the year, resulting in an extra mortgage payment made each year – 13 instead of 12!
Check with your HOMESTAR Mortgage Loan Originator to ensure you can afford an extra mortgage payment each year.
2. Use Extra Funds Toward Your Mortgage
If you have received extra funds, you can put them toward your mortgage. These funds can come from your tax return, stimulus payments, a bonus from work, or cashback rewards from your credit cards. This won’t cut into your regular monthly budget because these funds are extra!
You can make payments toward the principal on your mortgage, rather than both the principal and interest, helping to lower your long-term interest costs.
3. Refinance Your Mortgage
Another way to pay off your mortgage early is to refinance to lower your interest rate and shorten your loan term. If you plan to stay in your home for many years, reducing your loan term could save you a significant amount of money.
However, keep in mind that refinancing your mortgage to a shorter term can increase your monthly payment, so be sure you can cover this extra cost.
Depending on your overall financial situation, paying off your mortgage early may or may not be the best option. Evaluate other areas of your finances first (specifically, those that are more pressing), such as having adequate emergency savings, funds to cover large expenses or purchases that may come up (like college tuition or renovations), enough money put away for retirement, etc. Only you can prioritize what your most important financial needs are based on your unique situation.
Reach out to your local HOMESTAR Mortgage Loan Originator to determine if an early mortgage payoff is right for you.