01Make Bi-Weekly Payments
Divide your monthly mortgage payment into two bi-weekly payments, and you'll end up making the equivalent of one extra monthly payment each year -- a move that will save you thousands. Lots of companies will try to get you to pay them to set up bi-weekly mortgage payments, but it's often as simple as making two payments to your bank, instead of one.
02Eliminate Your PMI
Did you put less than 20% down when you bought your house? If so, you're probably paying private mortgage insurance. Work to get rid of it as soon as you can. Then, apply the monthly savings towards the principal of your loan. You can request that your private mortgage be canceled once you have 20% equity in your home -- either by paying down your mortgage or having your home go up in value.
03Refinance to a Shorter Loan
Have a 30-year loan? Consider refinancing to a 15-year loan, if you can get an interest rate that's 1.5% lower than your current rate. It's a move that could translate into six-figure savings! Lots of people get a 30-year loan and say they're going to make extra payments, but then life gets in the way and those extra payments never happen. There's nothing like a binding contract to make sure you stick to your goal of paying your house off early.
Tip: Have your lender crunch the numbers on a 10-year loan, while they're at it, You may just find that going with a 10-year mortgage, instead of a 15-year won't affect your monthly payment as much as you think. And getting out five years sooner? That's cause to celebrate.
04Make the Most of Windfalls
Apply all bonuses, raises, gift money and windfalls towards the principal of your loan, and you'll save yourself loads of interest. If you're in the habit of rewarding yourself whenever you get some extra cash, log into your mortgage account, and let the dwindling balance be your reward. Better still, print out an amortization table, and look to see how many months you've jumped ahead with each payment.
Tip: If you get paid weekly, there are several months a year where you'll get an extra pay check. Use that to pay down your mortgage
When you make this month's payment, make a second payment in the amount of next month's principal payment, or just add an extra $100, if that's all you can swing. Over time this simple move will knock years off of the life of your loan.
Note: Be sure to indicate that your extra payment is to be applied towards the principal only.
How to Pay Off Your Mortgage Faster
There's no freedom like the freedom of owning your own home. Use the following strategies to pay off your mortgage faster: