05 Jul 10 Ways To Pay Your House Off Sooner
Have you ever dreamed of what it would be like not to have to make that huge mortgage payment each month? You can probably think of all kinds of things you could do with that extra money—from funding your retirement to going on a much-needed vacation—right?
And here’s the good news: paying off your house sooner doesn’t have to be just a dream. You can make it a reality! Here are 10 ways you can pay off your house sooner:
BEFORE YOU BUY…
#1 Maximize your down payment BEFORE you buy
The more you can put down on a home, the less you’ll pay in interest and the quicker you’ll be able to pay off the loan. Aim to put down at least 10% of the mortgage at the time of purchase, but 20% is even better.
#2 Don’t buy too much house
You want to make sure that you can afford the house you want to buy considering your current financial situation. Check out this handy mortgage calculator to see if you’re financially ready to buy a home because your monthly mortgage payment shouldn’t be any more than 25% of your income. Also, will you have enough money to pay for closing costs, maintenance, and utilities?
Remember, taking out a 15-year fixed-rate mortgage will save you from paying tons of interest versus a 30-year fixed-rate mortgage. So how you set up your loan matters too.
AFTER YOU BUY…
#3 Refinance your loan
If you have a 30-year mortgage, refinancing it to a shorter-term mortgage can save you a lot in interest payments and cut years off of your mortgage. If refinancing will get you the same or a lower interest rate, and you can afford the payments and closing costs, go for it!
Otherwise, you can “pretend” that you refinanced and skip the closing costs by simply treating your 30-year mortgage like it’s a 15-year one. By making extra payments, you’ll pay it off faster!
#4 Pay a little extra monthly
If you have an extra $50, $100, or more each month in your budget, add this to the principal of your mortgage to reduce the overall interest you’ll end up paying, and pay off your house sooner. Every little bit helps! Really!
#5 Make 13 mortgage payments yearly
Making one extra payment per year doesn’t seem like much, but it can help you pay off your house several years earlier. There are a few ways to do this:
> Figure out what 1/12th of your payment is and add that to your monthly payment; at the end of the year, you will have made 13 payments instead of 12.
> Simply make a full 13th payment on the principal at some point in the year (maybe when you get your tax refund or work bonus).
> Make a bi-weekly mortgage payment. Instead of making 12 monthly payments, make half of a mortgage payment every two weeks (that’s 26 half payments) which will result in 13 full mortgage payments for the year instead of just 12. This takes a little discipline to make this payment every two weeks, but it is a viable option.
#6 Downsize to a smaller house
Okay … so you likely won’t win many “social points” with your friends and colleagues for this one, but one of the best ways to pay off your house sooner is to sell your larger house and use the profits to buy a less expensive, smaller one. In fact, depending on the size and value of your current home, you could possibly have enough to outright buy a smaller house and eliminate your mortgage almost overnight! But if not, at least you will have a much smaller loan and will be able to pay it off even faster.
#7 Reduce your spending
Again, this isn’t one of those fun things to do, but it can be very effective in helping you to pay off your house sooner. Take a hard, honest look at your spending. What can you cut and instead designate that money toward paying off your mortgage early? This will require not only self-sacrifice but also self-discipline. Here are some ideas to get you started:
> Cancel cable
> Eat at home instead of eating out; bring your lunch to work
> Stop buying new clothes/shoes/nonessentials
> Skip the fancy coffee; make it at home
> Cut your lawn service and do it yourself
> Switch insurance providers
How can you reduce your spending?
#8 Increase your income
After decreasing your spending, consider ways to also increase your income and put the extra toward paying off your mortgage. What can you do to grow your income, short term or long term?
> Sell items on eBay/Craigslist
> Handyman/Yardwork
> Freelancing (writing, tutoring, photography, accounting, etc.)
> Overtime or extra projects at your job
> Babysitting/House-sitting/Pet-sitting
Put your skills to work an extra 5-10 hours per week and put that cash toward paying down your mortgage.
#9 Tell your family and friends
This may seem a little odd, but hear me out. It’s all about accountability and encouragement. When you tell someone that you’re trying to lose weight, all of a sudden, there’s more at stake. You don’t want to have to tell the person you messed up, so letting others know what your plans are can help you stay on track and feel encouraged not to give up at the same time.
#10 Allocate surprise money to your mortgage
This is simple–it takes self-discipline–but the rewards are great! You can shave months or even years off of your mortgage and slash how much you pay in interest by allocating work bonuses, tax refunds, or inheritance money toward your mortgage.
If after reading these 10 tips you’re more motivated than ever to pay off your house sooner, check this handy mortgage payoff calculator and get started today!
(Please note: if you’re going to start making extra payments toward the principal of your loan, be sure to contact your lender to make sure that your payments are properly applied. The lender may have specific stipulations for this that you need to abide by.)
This newsletter was prepared by a third party company to be used on the Russell & Company and Simple Money Tips for Women websites.
