Your home loan is one of the biggest financial investments you may make in your life. It is also one of the debts that we usually like to pay off as quickly as we can. Here are some tips to help you pay off your home loan faster.
Shop Around for the Best Possible Home Loan Deal
Before you even try to get a home loan, you must shop around for the best possible deals that some lenders might be offering. Look beyond the big banks and start looking at smaller lenders that can offers good home loan options for you. Small lenders, such as Oink Money, usually offer home loan options that have lower interest rates, lower ongoing fees, and longer loan terms. You can take advantage of these deals towards paying off your home loan faster later on.
Divide your regular monthly payment in half and then pay the first half in the first two weeks of the month and the second half to the last two weeks of the month. Making bi-weekly payments allows you to accomplish three things for your home loan:
- Since more scheduled payments will be made, this will also reduce the interest of your home loan.
- You get to pay an extra payment every year as compared to regular monthly payment schedule. There are 52 weeks in a year, divide that into two and you have a total of 26 yearly payments.
- Making bi-weekly payments for the duration of the loan will shave off several months or even years of payments.
Be sure to talk with your lender before making bi-weekly payments. There are lenders who are not open to bi-weekly payments and you may end up being penalized for making extra payments or for paying off the loan balance early.
Round Up Your Bi-Weekly or Regular Monthly Payments
Rounding up payments allows you to pay extra without missing the funds. This is an effortless way of shaving off a few months off your home loan term. For example, your regular monthly payment is $363.67, you can round it up to $400 a month. That’s an extra $36.33 every month or $435.96 a year.
You can also try bumping up your payments to an extra $50 or $100 every month. The extra amount of money you add to your payments will add up to a significant amount over time, which shortens the term of your home loan.
Find Another Source of Income
Having another source of income will also be a big relief especially if you are already struggling to pay off your home loan. There are a lot of ways and ideas to find another good source of income which include:
- Selling your used and unused clothes on eBay.
- Selling your old books on Amazon.
- Investing in real estate.
- Starting a service business.
- Making a product and selling it
- Having a garage sale.
- Finding a part-time job.
Now the extra funds you get from doing the things above may small, but they will definitely add up. You can then use the money to help you pay off your home loan.
Making an Extra Payment Every Year
If your monthly income is not enough to commit to bi-weekly payments, you can still opt for making an extra payment every year. You can use your bonus from work or your 13th month pay as an extra monthly payment towards your home loan. This should shorten the term of your home loan.
Refinance Your Home Loan
One of the best ways to save interest, lower your payments, and most importantly, pay off your home loan in half the time, is to refinance your loan. Refinancing your home loan to pay it off faster has two main benefits:
- Refinancing can lower the interest rates of your mortgage. Lower interest rates means lower monthly payments, this will help you to pay less for your property.
- Refinancing allows you to clear your home loan in less time. If you have a 30-year home loan term, you can shorten it by refinancing the loan to a 15-year term. This should help you clear your debt and own your home much sooner.
Most homeowners recommend that you refinance your home loan if you want to be free from debts and become the real owner of your property.
Maximize Your Down Payment
The best way to own a home is to buy it with 100% down payment. Buying a home with cash may sound weird, but you won’t have to worry anymore about the monthly mortgage payments that could weigh you down.
You can also try putting down a big down payment if you can’t afford buying the house in cash. Remember that the bigger your down payment is, the less money you’ll need to finance later on. This will then add lead to lower monthly payments, making it easier for you to pay off your loan early.
Prioritize Your Home Loan
You should make your home loan a priority if you want to pay it off faster. Cutting out some of your not-so-important expenses can add up to significant savings later on. Find ways to save on your other expenses so you have enough money to pay for your mortgage payments.
There’s no point in paying for things that you don’t need. The same can also be said when overpaying on things like your electricity bills, water bills, cable bills, phone bills, etc.. It’s best if you can cut back on these expenses and use the extra cash to make additional payments on your home loan.
Benefits of Paying Off Your Mortgage Early
There are lot of benefits you can enjoy from paying off your home loan early but these two are the best:
- You have the potential to save tens of thousands of dollars. Imagine what you could do with the amount of money you can save! You can use the extra money to buy other important things, pay off your other debts, make home improvements, and much more!
- The peace of mind knowing that you no longer owe anyone for your property is irreplaceable. You’ll be free from stress and won’t become a slave to a lender anymore!
With that in mind, we hope that these tips will help you pay off your home loan early. Doing so will allow you to truly have your home to yourself and be free from such a big debt.