After becoming debt-free, my current financial goal is to payoff my mortgage early. This is a huge undertaking and can be very daunting! But when I sat down and calculated how much interest I’ll pay for the next 29 years, I was shocked. It was $251,817 in interest alone! That’s just craziness!
I’m now determined to payoff my mortgage as soon as possible.
Here are a few ways to pay off your mortgage early. Try some or all of these!
- Get Motivated and Make it a Goal: Once paying off your mortgage early is a personal goal, you’ll get motivated to make it happen ASAP. You will literally find ways to save more money such as making analyzing your budget in more detail or canceling cable. Or you’ll find ways to make more money such as finding a side job.
- Consider a 15-year mortgage instead of a 30-year mortgage: I recently refinanced from a 6.9% interest rate to a 4.5% interest rate and SHOULD have switched from a 30-year mortgage to a 15-year mortgage. But I didn’t want to be tied to an extra $400/month payment. In reality, the 15-year mortgage would have been affordable and a much better financial decision. It would have saved me $132,280 over the life of the loan.
- Biweekly Payments: Making biweekly payments is one of the easiest ways to pay down your mortgage early. Call your bank and ask them to set it up and then it’s automatic. With biweekly payments, your payments are made every other week instead of every month so you will end up paying 1 extra payment per year. This 1 extra payment will be sent as a principle payment, which will pay down your mortgage faster.
Savings: Making biweekly payments on my 30-year mortgage will allow me to pay off my mortgage in 22 years.
- Pay an extra $200 per month: Look at your budget and determine a fixed amount you could reasonably pay each month as an additional principle payment. Make it reasonable so you will continue to make this extra payment for the duration of the loan. If it’s TOO ambitious, you might cancel the payments after a couple of months.
Savings: Making biweekly payments and an extra $200 per month will allow me to pay off my mortgage in 16 years.
- Send an extra principle payment per year: After setting up that automatic $200/month, consider setting up one extra principle payment per year that’s equal to your monthly mortgage payment. This could come from any extra, unexpected income like bonuses, gifts, an inheritance, or tax refund.
- Use your whole tax refund as another principle payment: If you’re still getting a tax refund, you could simply put the entire tax refund towards your mortgage as a principle payment. However, this requires a plan. For YEARS, I planned on doing this and NEVER did because I always found something else that “I needed.” Make it a habit that you’ll keep.
- Check your progress monthly: Motivate yourself with an online tracker or log into your Bank’s website and check your progress monthly. Seeing your mortgage go down quickly will motivate you to keep making sacrificing and making those extra payments!
Here are 6 of my favorite articles this week. I hope these articles motivate you to save more money and maybe use that extra money to pay down your mortgage early!
- Frugal Rules: It’s Not What You Make, It’s What You Keep. This is an excellent article that will inspire you to budget and save more money.
- Life And My Finances: How To Trick Yourself Into Saving. This is a detailed article about making saving effortless and easy to save more money.
- Making Sense of Cents: What Bad Financial Habits Do You Have? Part 1. We all make some mistakes with our personal finances, this articles discusses some bad habits in detail.
- Your Daily Finance: The Basics on How to Build a Better Budget. This is another great blog on making a budget. If you don’t have a budget, know is the time to make one!
- Wise Bread: 15 Essential Life Hack That Will Save You Time in the Morning. These are easy and quick ways to save time, which leads to saving money.
- Digital Spikes: Save Money with Online TV: How to Get Free Cable. Similar to my article about cancelling cable, this article talks about getting free TV.