A home is a big purchase. Because it’s such a big purchase, it can take a long time to pay it off, oftentimes as long as 30 years.
But it doesn’t have to take that long! You can pay off your mortgage in a shorter time frame, if you use the right strategies.
A recent article from realtor.com outlined strategies homeowners can use to pay off their mortgages quickly — without going broke in the process — including:
- Make one extra payment per year. It may seem like making a single extra mortgage payment per year wouldn’t make much of a difference, but those single payments add up. Making one extra payment per year can help you knock about four years off of a 30-year mortgage.
- Pad each monthly payment. Another strategy that can knock some time off your mortgage is to add a bit extra to your payment each month. For example, let’s say you have a $200,000 30-year fixed-rate mortgage with an interest rate of 4 percent. Over the course of that loan, you’d pay more than $143,000 in interest. However, adding $100 to your monthly payment would allow you to pay off the loan about five years sooner—and save almost $27,000 in interest in the process.
- Refinance to a shorter-term loan. If you bought your home when interest rates were higher than they are today, then refinancing to a shorter-term loan (like a 10 or 15 year fixed-rate mortgage) can not only help you pay off your home faster, but also save a significant amount of interest in the process. Just keep in mind that your monthly payments will likely increase because you’re shortening the length of time to pay off the balance, and you’ll also have to pay closing costs when you refinance. Before you refinance, talk to a lender to make sure that the pros outweigh the cons.
These strategies can work with your primary residence mortgage or your second/vacation home.