Are you planning on making a purchase or investment in the future that requires a large amount of capital? Paying off your mortgage early can give you the extra money you need to:
- Remodel your home
- Pay for a new car
- Plan for a vacation or wedding
- Pay off your kid’s college tuition
Paying off substantial home loans can be a huge drain on your budget and prevent you from reaching important longterm financial goals. Here are three ways you can pay off your mortgage early and save money on interest payments:
1. Switch to a 15-year Mortgage
Mortgages are usually offered in ranges of 15, 20, and 30-year terms. While the 15-year mortgage will result in higher monthly payments, it also allows you to pay off your loan much earlier. In the long term, you’ll end up paying a lower amount in interest.
You can also get a 30-year mortgage and just pay an extra $50-100 a month to pay off your mortgage early, but if you are committed to paying higher monthly payments and can afford it, locking in a 15-year mortgage is one of the best ways to pay your mortgage loan off early. If you do end up paying extra on your mortgage each month, it’s always smart to apply that payment to the principal of the mortgage and not the interest on your loan.
2. Refinance Your Mortgage Loan
If your credit score is great, you might be able to pay off your mortgage early by getting a better interest rate when you refinance your loan. Not only will getting a better interest rate save you a lot of money on your mortgage in the long run, but it’ll also lower your monthly payments as well. Check with a mortgage broker to see what mortgage refinancing options are available for you. Terms and conditions will depend on your unique financial profile and mortgage goals.
3. Put 10% or More Towards Your Down Payment
This may lead to undesired outcomes, such as downsizing your dream home or tightening up your budget, but if you’re serious about paying off your mortgage early, you should put at least 10% or more down. The more money you can reasonably afford to put towards a down payment, the easier your mortgage will be to pay off and refinance in the future. Of course, every path to home ownership is different, but there are certain steps you can take to prepare for you new home mortgage.
When you know your financial and home ownership goals, you can prepare early for your home mortgage. The better you budget and the more you save, the easier it’ll be to put down a 10%-20% payment. In the long-run, this’ll make it easier to pay off your home mortgage early.
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Preferred Mortgage Corp. of NY is a mortgage broker located in Rochester, NY.
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