4 Long-term Strategies for Paying Off Your Mortgage
How to save time, money and pay off your loan in a way that makes sense for you.
As wonderful as it is to be a homeowner, it's not uncommon to want to pay off your mortgage at the earliest possible opportunity. After all, it's the largest purchase—and debt—most of us will ever experience and paying it down over time is the ultimate goal.
The 30-year mortgage is the most common in the U.S., and 30 years can seem like forever when you are facing monthly mortgage payments. So what are the long-term strategies for getting your mortgage paid off? Here are a few that can help:
1. Talk to your loan servicer about biweekly payments.
If you pay your mortgage biweekly, that comes to 26 payments a year—the equivalent of 13 monthly payments instead of the usual 12. A biweekly payment schedules in an extra month's payment, meaning you'll pay off your 30-year mortgage 5 years faster and save thousands in interest payments.
2. Make extra payments toward your mortgage principal.
Your principal is the amount of money you owe on your house, not the interest. (Each month, your mortgage payment consists of money applied to your actual loan, then the loan's interest, and other fees such as taxes.) By making extra payments toward the principal, you are paying down the loan faster, shortening the life of your loan and the number of years you'd pay interest. You can pre-pay your principal in a few different ways:
- Add extra money to each monthly mortgage payment
- Pay a single lump sum at one time to your lender earmarked for the principal
- Make one extra mortgage payment each year (be sure to label the payment "for principal only"
3. Ask your lender if you qualify for a shorter-term loan.
Why? Because the shorter the loan term, the lower your interest rate will be. Although 30-year terms are the most common, lenders often offer 10-, 15-, 20-, and 25-year loans. You can easily calculate your savings and your new monthly payment by plugging in your potential new loan rate. Keep in mind that shortening your term will allow you to pay off your loan faster and save money on interest in the long run but will result in higher monthly payments.
When you refinance, you essentially exchange your existing mortgage for a new one, and you'll have to go through similar closing processes on the new loan. But it's a move that might be well worth it: According to Black Knight Mortgage Monitor, the average homeowner could save approximately $300 a month on a refinanced mortgage. It pays to call your lender and see what the current refinance rates are and how that would impact your monthly payments and the lifetime cost of your loan.
Whatever your financial goals, your mortgage lender can help you evaluate your current situation and make the best money-savings decisions that are right for you. Lennar mortgage can help you get started—click here to get your personalized rates.