If there’s one goal that’s in the back of every homeowner’s mind, it’s that of the day when they make their last mortgage payment. US News and World Report tells us that recent statistics from Freddie Mac show us that 85-90 percent of homebuyers get 30-year mortgage. Thirty years is a long time to owe someone money, and a long time to pay interest to a bank.
We’d like to help you cut down the amount of time you owe on your home by sharing with you 7 ways you can pay off your mortgage faster.
1. Refinance to a Shorter Term
According to the U.S. Census Bureau, the average price for a home in 2010 was $272,900. Putting 10 percent down leaves the buyer with a mortgage balance of $245,610. If a consumer took out a 30-year, 4.5% note on that mortgage, his payment would be $1172.58. The total paid by the end of the 30 years? $422,128.69. That’s over $176,000 paid in interest alone.
However if that same borrower took out a 15-year note at 4.0% interest, his payment would be a bit higher at $1816.75, but his total paid at the end of the 15 years would drop substantially: down to $327,014.55. That’s a savings of over $95,000 in interest and 15 years less of slavery to the bank that holds your mortgage note.
2. Set in Stone an Amount to Each Month’s Payment
If you’re not crazy about lowering your mortgage term (and even if you are) a good way to pay off your mortgage faster is to add a set-in-stone extra amount to each monthly payment. Depending on your budget, that may be $100, it may be $500. Just pick an extra amount that you know you can afford to add to your mortgage as an extra principal payment each month, and watch that balance drop faster than ever.
3. Use Your Debt Snowball Payments
If you’ve recently dumped – or are in the process of dumping – consumer debt, take the amount of money you were putting toward your consumer debt payments and simply apply it toward your mortgage balance after the consumer debt is gone. Since you’ve already been spending that money on debt each month, you won’t feel extra strapped for cash, but the drop in your mortgage balance will be astonishingly noticeable.
4. Get an Extra Job
Whether it be via a part-time job on nights and weekends (Deacon delivered pizzas in order to accelerate the payoff of their $52k in consumer debt) or a side hustle business that you can work on in your own time, money from an extra job can substantially reduce your mortgage balance. Last year alone I made well over $12,000 in freelance jobs working from home. Imagine what kind of impact that amount of cash could make on your mortgage balance.
5. Declutter Big Time
Most all of us have closets and garages full of stuff we never use anymore: those snow skis you swore would become your next pastime, the boat you never have time to use, the designer shoes you had to have but never wear. Go through each and every closet, drawer and storage area, pile up the things you haven’t used within a year, and sell them on EBay, Craigslist or on a local Facebook group. I’m willing to bet you can make yourself at least a few hundred dollars to put toward your mortgage debt in the process.
6. Create a Challenge Everything Budget
A Challenge Everything Budget is a budget by where you take every single line item in your budget and work to reduce or eliminate it. After you’ve done that, you take the monthly savings that you’ve earned and put those dollars toward the mortgage balance each month. Some ideas for budget cuts?
- Dump your cable or satellite service
- Reduce your entertainment/restaurant/liquor spending
- Go on a clothes shopping ban for a year
- Shop around for reduced insurance rates
- Work to minimize your electricity and water bills by using less
- Learn how to spend less on groceries
By cutting costs where you can and putting the money savings toward your mortgage balance, you can easily add hundreds of dollars a month toward your mortgage payoff.
The first step to getting out of debt is tracking your finances. Personal Capital has a FREE tool where you can not only track your spending but you can track your debt payoff as well.
7. Downsize to a Smaller Home
This may not be the simplest or most fun option, but as many of our debt success story participants have learned, downsizing is often well worth the freedom that comes with being debt free.
If you’re really fired up about eliminating your mortgage debt, consider whether downsizing your home is the right move for you as a way to become totally debt free and to start on the road to building wealth.
By utilizing the 7 tips above, you can surely reduce the amount of time you’re paying on your mortgage by several years.
Do you still owe on a mortgage? What are your tips for accelerating debt payoff?