3 Ways to Save on Interest & Pay Your Mortgage Down Faster
Wednesday Aug 30th, 2017Share
Just because you signed on for a longer amortization period, with payments scheduled well into your older age, doesn’t mean you have to be a slave to mortgage payments. There are easy and effective ways to save on interest, while paying your mortgage down faster.
Here are three simple strategies to consider:
1. Biweekly payments
Instead of making payments once a month, you can ask your mortgage lender to accept biweekly payments, dividing the monthly amount in half. With this approach, you’ll actually make 26 payments every year, paying down more than you would if you made 12 monthly payments.
The reason is that there are 13 four-week payment periods in a year, as opposed to 12 months, allowing two extra biweekly payments. And, it can really add up to your advantage. For example, you could cut three years off your mortgage and save more than $16,000 by making biweekly payments instead of monthly ones on a 25-year mortgage of $300,000 at 3%.
2. Round up
Another easy way to make faster mortgage payments is to round up your regular payment by a small amount, whether it is monthly or biweekly. For example, if you normally pay $575 every two weeks, consider bumping it up to $600. Most homeowners find that they don’t feel the small additional amount in their regular budget and the savings do add up to be quite substantial. A good time to start rounding up is if you receive a pay raise at work.
3. Extra payments
A third way to speed up your mortgage payments is to put in extra money when it comes your way, like through a tax refund, inheritance or work bonus. You must be disciplined to do this, though – the lure to spend it on other luxuries is strong! It’s also advisable that you speak with your mortgage lender first before you pay down a lump sum, as certain rules and restrictions may apply to your specific mortgage.
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