Did you know that paying extra on your mortgage can not only take years off your loan but possibly save you tens of thousands of dollars in interest?
If you’re looking at how you may be able to cut your home loan down to size and eliminate house payments from your monthly budget forever, here are three simple ways to go about it.
1. Increase or round up your monthly payments
Even if all your budget plan can allow for is an extra $20 or $30 dollars, the additional money that you apply reduces the balance of your principal and can make a difference over time. One way to do this is to round up your monthly payment to the nearest $1,000. So if your regular payment is $965.50, simply round it up to an even $1,000. Paying that little bit extra could be a good option to chip away at your loan, especially if you’ve already refinanced or don’t qualify for refinancing. See how much you can save with this roundup mortgage calculator.
2. Make one extra payment a year
Before you dismiss this as a doable option, consider your income tax refund or holiday bonus from work as part of your budget plan. If you truly want to give your house payments the boot much sooner and whittle away at that principal ahead of schedule, then set aside those additional dollars and put them to work!
3. Make biweekly payments
If it works better for your budget plan, consider paying half of your monthly payment every two weeks, you’ll have made 26 half payments. This adds up to 13 full payments – or one extra full payment a year. Although some lenders may not allow you to set up your payment schedule up this way, you can easily do it yourself by establishing an online account (if you lender has this capability) and make the twice monthly transactions yourself.
Note: Paying down the principal on a home loan doesn’t reduce your monthly payment, but shortens the length of your loan and reduces the amount of interest you’ll pay.