3 Ways to Pay Off Your Mortgage Faster

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If you want to pay off your mortgage more quickly, there are three possible methods you can try. Check out these options. 

If you’re a homeowner with a mortgage, you may be very eager for the day when you can say goodbye to your home loan for good. After all, those monthly payments coming out of your checking account each month can feel like a financial burden.

The good news is, there are a number of ways to pay off your home loan ahead of schedule. In fact, here are three techniques you may want to try that would allow you to be debt-free sooner and own your home free and clear ahead of schedule.

1. Biweekly payments

Making biweekly payments is one approach that could help you pay your mortgage down more quickly. Basically, to do this, you’d just make half your mortgage payment every two weeks instead of paying your entire mortgage bill once a month. As a result, you end up making 13 full payments instead of 12, since a year has 52 weeks in it.

Many people are paid biweekly, so this approach can make sense since you’ll just pay half your bill with each paycheck. Your mortgage lender may have a system in place to let you do this, or you can transfer the amount to a high-yield savings account every two weeks and then make your mortgage payments out of that account (including the extra payment when the money is in there).

Paying your loan biweekly can cut years off your payment timeline. The table below shows how biweekly payments could impact your loan if you start them right away after borrowing $300,000 on a 30-year mortgage at 7.00%.

You would save an estimated $100,661 in interest by switching to biweekly payments, and become free of your mortgage debt years earlier. If you want to try this approach, ask your mortgage lender if it allows a biweekly payment option. If not, open a savings account today and start paying your mortgage into it by making half your monthly payment every two weeks, then transferring those funds to the lender.

2. Lump sum payment

Another option is to make a lump sum payment either once or several times over the life of your loan when you get access to extra cash. A lump sum payment can make a surprising difference, even if you only make it once, since it will reduce your principal balance more quickly, which in turn can reduce future interest you pay.

RELATED: Mortgage Calculator

Let’s say, for example, that you borrowed $300,000 at 7.00% and made a lump sum payment of $5,000 in year eight of your loan. Here’s how that would affect your mortgage.

3. Refinance

Finally, you could potentially refinance your loan to pay it off faster. This technique would work if you either:

Refinanced to a loan with a shorter term: Be aware that this could substantially increase your monthly payment, even if you are able to get a loan at a lower rate, since you’d be reducing your payoff time.Refinanced to a loan with a lower rate and kept making your same monthly payment: More of your payment would go toward principal in this situation, allowing you to pay off your loan more quickly.

The potential savings associated with refinancing would vary depending on the new loan term you choose and the new interest rate you obtain. Your refinance lender would provide you with details about the total cost of repayment and timeline so you could decide if this was right for you.

Any of these three techniques could help you become free of your mortgage debt more quickly, so consider whether implementing any or all of them could be a good option for you.

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