How to Pay Off Your Mortgage Early Without Going Broke
Paying off your mortgage may seem like a mountain you simply cannot climb. You went through the stress and excitement of house shopping, found the perfect place to live, and now you have to pay for it.
Even if you pay off your mortgage a couple years early, it can save you thousands in interest payments. However, trying to pay extra on your mortgage can cause money stress you simply don't need. Here are a few of the best tips to help you with how to pay off your mortgage early without going broke.
Round Up
You don't have to go broke trying to pay hundreds extra every month on your mortgage payment. Simply start by rounding up to the nearest $100. For example, if your payment is supposed to be $1,248.95, round it up to $1,300. That just an extra $51.05 per month, but over the course of a year, you'll pay an extra $612.60, which is nearly a half a payment.
Even if you don't think you can afford the extra $51, you can round up to the nearest $50 or to the next dollar even. While the smaller amounts won't make a huge difference, they still help and you can adjust as you feel more comfortable in the future.
Use Your Tax Refund
Most families get a pretty nice tax refund each year. When tax time rolls around, allocate at least some of the cash to pay extra on your mortgage. The smartest thing you could do is to pay it all towards your mortgage, but even if you just use your tax refund to make one extra payment per year, it will make a big difference.
Paying one extra payment per year with your tax refund will help you pay off your mortgage a few years early. If you can make two extra payments, it will get you there even faster.
Create Your Own Payment Schedule
If you're on a 30-year mortgage it doesn't mean you cannot make the payment of a 15-year mortgage and cut your term in half. You can use an online amortization schedule calculator to figure out what your payment would be on a 15-year mortgage. Just make sure you enter the right interest rate and the loan amount (not the amount your home is worth or the sales price).
Ditch PMI & Pay the Extra Towards Your Mortgage
Maybe you have a mortgage that includes Private Mortgage Insurance. This happens when you don’t put down at least 20% on most loan programs. However, when you build up enough equity, you can ditch PMI through a refinance or just by asking your current mortgage company to waive it.
You may be paying an extra $100 or $200 on your mortgage payment every month for the PMI portion. Getting 20% equity in your home may take a few years, but once you do, you can ditch PMI and start paying that extra money towards your payment every month.
You don't have to go broke to pay off your mortgage faster. These strategies will help you and you can even combine a few of them to get your mortgage paid off even sooner.