If you want to make some headway with your personal finances, you may want to make plans to repay your debts. When we talk about debt, most of the time we’re referring to the “bad” kind: student loans with balances greater than your annual salary, or consumer credit card debt. But there’s “good” debt, too.
That’s what your mortgage is likely considered. But good debt or not, it’s still money you borrowed and must eventually repay — with interest. It’s interest that makes debt so expensive to hold over time. The longer it takes you to repay borrowed the money, the more in interest you owe. That’s one big reason to start working to pay off your mortgage as soon as possible.
Being debt-free is the first step to being fully financially free. With no debt, your finances are more secure and you can focus on achieving other goals with your money.
Not to mention, debt plays a role in how we feel about money. Many people want to pay down their mortgages to feel less stress and anxiety.
More financial stability, less stress and worry over your money, and a smaller price to pay for your mortgage (and home) over time. These are some of the reasons you should consider paying off your mortgage early. Now, here’s what you can start doing to completely pay off your mortgage ahead of schedule.
Total Mortgage offers some of the lowest rates in the industry, start saving now.
Start paying more: Increase the amount of your monthly payments if there’s no prepayment penalty associated with your loan. Even $100 per month can make a big difference over a few years. Make sure your added payment is going towards your principle — not the interest!
Just round up: If you can’t manage adding a big amount to your monthly mortgage payment, simply round up and tack on a smaller number. For example, if your mortgage payment is $975, make a payment of $1000 each month.
Start paying extra: In addition to paying more, you can also pay more often. Make bi-weekly payments to chip away at your mortgage at warp speed.
Consider refinancing: Depending on your situation, it may make sense to refinance your mortgage to secure a better interest rate. This may help you pay your mortgage off faster if more money can go towards the loan’s prinicple rather than a big interest amount each month. You can also refinance for a shorter-term mortgage.
Make lump sum payments when you can: Every time you receive a lump sum of extra money — tax refund, big commission or bonus at work, Christmas or birthday gift, inheritance — put it towards your mortgage in one big payment. That will take a big chunk out of what you owe, and get you that much closer to debt freedom.
Reduce expenses so you have more money to work with: If you’re struggling to come up with any money to make bigger or extra payments on your mortgage with, it may be time to look at your budget. What expenses can you reduce or eliminate? When you stop spending, you can take that cash and use it to chisel away at your home loan.
Are there any reasons you wouldn’t want to pay off your mortgage early? There may be some financial priorities that need to come first. If you don’t have an emergency fund, for example, you should work to build your cash savings before putting all your extra money towards your mortgage payment.
Additionally, if you haven’t started saving for retirement you need to establish at least one investment account before worrying about your mortgage. Or if you’re looking to move in the next few years, you may not want to tie up your cash in your home.
But if you’re ready to settle down and start working towards debt freedom — and financial independence — you should consider paying off your mortgage early.
Are you looking to refinance your current mortgage or buy a new home? Rates are close to the lows of the year, and you may be able to lock in a low rate for many years to come. Call us today to get a free rate quote or to speak with one of our licensed mortgage professionals.