As a homeowner you should thank your stars, if you’re able to fund your retirement accounts comfortably, have no high-interest debt to serve and have got sufficient dollars stashed in your bank accounts to meet your life’s other goals. Why? The reason is simple: You can pay off your mortgage before retirement.
Owning your home free of all obligations will provide you with the time and space to relax during your golden days. To start with, .
Add an extra amount to your monthly payments
Every extra dollar would help to reduce your principal debt amount. At an early stage, a lot of your monthly mortgage payments are eaten up by the interest on the loan. As per a prominent financial website, if you contribute an extra amount of $100 to pay off your $100,000 mortgage in 30 years at an interest of 4.5 percent, then you’ll be paying a whopping $23,300 extra, in case you repaid the loan eight and a half years early.
Make a payment every two weeks
. But, you can do it yourself at no cost at all. Basically, you’re making extra payments every year. According to the estimates, if you make mortgage payments in every two weeks on a $100,000 loan with 30 years term at 4.5 percent, then that’d reduce around 5.5 years off the loan term and save you around $14,000 also.
However, mortgage payments when divided into two will yield minimal payments.
Make extra payments whenever you can
Making extra payments is an effective way to reduce your monthly household costs and drive up your overall savings in the long run. However, do so after getting the nod from your lender, or else you may be slapped with an pre-payment penalty.
Make one extra payment a year
On the flip side, a single yearly mortgage payment will provide you with the same savings as would half payments in every two weeks. But, if the mortgage payments aren't important, then you can wait till the year end and make the payment or when you get your tax refunds or bonus.
Refinance to lower the interest rate
Refinancing will save you dollars depending upon how much mortgage payment you can afford, given your present household income. Still, a refinance should cut back the loan term and yield greater dividends in terms of interest.
Even after a successful refinance, you should continue making higher monthly mortgage payments.
Refinance your mortgage to a shorter term
Your loan term should be shorter than before, after a successful refinance. This will help you to become debt free faster and completely own your house before retirement.
Read more - The key basis to refinance your mortgage
Add dollars from various sources
Allocate dollars from windfalls like a bonus, moonlightings (second jobs), freelance projects, and so on to repay your mortgage. If you have varying sources of income, then instead of making extra payments regularly, you may make one large payment, as per your convenience.
Cut expenses and put the savings toward your mortgage
As far as austerity measures are concerned, you can switch over to an affordable cell phone plan, do away with cable television, or otherwise cut back on all the extra and unnecessary living costs to create a larger fund to make your mortgage repayments. Starting off with a frugal life might be difficult, but over time, you’ll get used to it.
Your focus to pay off your mortgage will drive you to save more money and spend less. On the other hand, if you choose shorter, fixed-rate mortgage, then you may have to live in a smaller house. When there’s no fixed cost, you can increase your withdrawal rate after retirement. Once you’re debt free, you’ll be able to sleep better at night.