If you have a 30-year fixed rate mortgage, you are not alone. Recent data shows that 30-year mortgages are still the most popular loan term for homeowners in the US, with over 70% of people applying for purchase mortgages choosing 30-year fixed rate mortgages, according to the Mortgage Bankers Association. But, just because you signed up for a 30-year mortgage, doesn’t mean you necessarily have to wait the entire term to pay off your mortgage. Check out these tips that can help you pay off your loan in less than 30 years:
Round your payment up each month
Rounding up your payment to the next highest $100 amount each month is an easy way to reduce the amount of time you’ll owe on your loan. For example, if your payment is $1435, pay $1500.
Set up bi-weekly payments and pay half of your payment every 2 weeks
Arranging bi-weekly payments with your lender will result in you paying 13 payments per year, as opposed to just 12 when you pay monthly.
Increase your payment when you receive a salary increase or bonus
Applying any extra income earned to your mortgage without cutting into your current monthly budget is another simple way to help to pay down your mortgage faster.
Use your tax refund to pay extra on your mortgage
Just like using a raise or bonus to pay extra on your mortgage, designate some of your annual tax refund to your mortgage each year.
Refinance into a 15 year loan
Choosing to refinance from a 30 year to a 15 year mortgage will drastically reduce the time it will take to pay off your loan, as well as decrease the amount of interest you pay.
Refinance to a lower interest rate
Lowering your interest rate will reduce your monthly payment and free up extra money that can be applied to your mortgage to pay it down early.
*Before you decide to pay off your mortgage early, make sure you check with your lender about possible prepayment penalties.