As exciting as it is to get approved for a mortgage with a low-interest rate, and buy your dream home, once you sit down and do the math, you might begin searching for ways to pay your mortgage off faster. The good news is there are some accessible ways to do just that, without creating additional financial stress.
Pay One Extra Mortgage Payment Each Year
It might not sound like much, but with your accumulative interest, and even how quickly you pay off your home, it can really add up.
Simply divide your monthly principal and interest by 12, and add that amount to your monthly payment. Just make sure the extra is applied to your principal. On a $200,000 mortgage with 4.5% interest, you will save $18,000 in interest and pay your mortgage off a full 3 years earlier.
Apply Unexpected Funds To Your Principal
If you can’t pay a bit extra each month into your budget, then apply the unexpected money you make each year to your principal. This could include your income tax return, bonuses at work, tips, or cash gifts you receive. Even if the amount isn’t a full payment, with consistency, it will slowly but surely waddle away at your surmounting interest.
A Little Bit Here And There
If the large sums of money are more challenging to apply to your principal, then pay a bit extra here and there. An extra $10 or $20 each month, an extra hundred every other month, round your mortgage payment up, or even apply your annual raise to your mortgage. You could even clip coupons and save change, and apply the extra to your principal.
Create A New Revenue Stream
While a full on part-time job may not be feasible, look for out-of-the-box ways to earn more:
- Rent out a spare room on Airbnb
- Drive Uber or Lyft part-time
- Freelance online
- Work a seasonal job to earn enough for one extra payment
- Sell household items you would typically donate, and apply the earnings to your mortgage
Reach Out To A Financial Advisor
Another excellent way to maximize your money is to reach out to a certified financial advisor. The goal is to present them with your full financial portfolio, including income, monthly expenses, and debt. They will advise you on the most effective ways of distributing your money, including how to prioritize paying off your mortgage, budgeting, and saving for retirement. They can even help you to determine when the best time to buy is, how much to put down, and when to consider refinancing.
When you sit down and do the math, you may be surprised to learn that even with a low-interest rate, you will be paying tens of thousands of dollars in interest over a 30-year term. Learn how to pay your mortgage off faster, and maximize your hard-earned money.
When you are ready to buy your first home, or your next home, the team at Jerry Sardone Realty is here to work as your dedicated realtor and guide.