Paying off the mortgage early is always a good option to go for provided you have the required money. A lot of people have seen the foreclosure crisis. Now people want be safe and secure to some extent by owning their home free and clear.
Here are 3 ways which will help you in paying off your mortgage in a safer and faster way. You can compare the options and go for the one which you think will suit you the best:
1. Pay more toward your mortgage: You can use the various online mortgage calculators and find out how much to pay more so that you can significantly shorten the length of your loan. You will be surprised to find that paying as low as $100 extra will help you in reducing the term of your loan by quite few years. The lower your principal gets, the more every payment is applied to principal. This is because a less amount will go toward the interest expense.
However, you should make sure that the extra payment is applied to the principal balance. Apart from that, before paying extra, you should check out whether or not a pre-payment penalty clause is mentioned in your loan docs.
2. Go for biweekly payments: Paying your mortgage payments biweekly will help you paying off the mortgage faster. There are 52 weeks and 12 months in the year. If you pay half of your regular mortgage payment every alternate week, you'll have made 26 half-payments which is equivalent to 13 full monthly payments, at the end of the year. Thus, it will help you make one extra mortgage payment which, in the long run, will help you pay off the home loan quite faster.
However, it will depend upon your bank whether or not they will help you in getting a biweekly payment plan. Some banks do it for free whereas others charge a fee.
3. Refinance your long-term loan: If you presently have a 30 years loan, then you can think of reducing the term of the loan by refinancing the loan. Refinancing a 30 year loan into a 15 year one is quite common. Your payments may be a bit higher on a 15-year loan, but you will be able to pay off your loan quite early.
However, while refinancing an existing loan, you should keep in mind that you will be liable for paying the closing costs. If you can afford the closing costs and decide to stay in the property for at least 2 years, then it will be a good option to refinance your loan and lower the interest rate as well as the loan term.