It's common sense that if you have a mortgage, you want to reduce years off of it so you can pay less in the long run. Many homeowners have a hard time figuring out how to do this effectively, but there are a few ways to do this that are better and easier than others. While it might seem obvious that you would just get a loan with a shorter term length, this can often be unaffordable for many. Here are the best ways in which you can reduce years off your mortgage:
Refinance and Reinvest.
Unless you wish to refinance your term length, you won't automatically save money when you refinance. If you refinance to a lower rate but have to keep the term length the same, this can set you back. One thing you can do is to apply the savings from your new rate back to your mortgage, which will effectively reduce the term length for a lower rate.
A plan in which you pay biweekly is the easiest way to take years off your mortgage. If you pay half of your payment every other week, you will be shaving 4 years off your mortgage. This means you will be paying 13 mortgage payments per year instead of 12 mortgage payments per year.
Pay More Each Month.
If you can afford to pay more than your regular mortgage payment each month, you should try to do so. You're essentially adopting the same strategy as you are with the biweekly payments, but you're just choosing how long you want to cut off your loan.
Use Extra Cash for One-Time Payments
If you really can't afford to pay bi-weekly or pay more than your regular payments each month, you should consider applying one-time payments to your loan. For example, if you get a bonus at work for a couple thousand dollars, you can apply that to your loan and it will literally translate into saving years on your mortgage.
Whatever you are considering, make sure you talk to your lender so you can discuss what option is the best for you in your unique situation. He or she should be willing to discuss these options with you so you can pay less.
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