More and more home owners today are looking for ways they can save money and pay down their mortgages faster. Although home ownership is costly, you will be able to save money over the life of the loan if you research some options. Many home owners are unsure about ways to pay down their home loan, and here are a few simple ways to go about doing so.
Switch to a shorter loan
Today, many home owners have a 30 year fixed mortgage loan. One way to possibly help pay down your loan quicker is by switching to a 15 year mortgage. If you can afford to make a higher payment, then this would be a great alternative as you would save years of interest compared to a 30 year loan. One of the benefits of a 15 year fixed mortgage is that the interest rate is a noticeable amount lower than that of a 30 year fixed. More often than not, if you are a home owner who plans on paying off their mortgage early, it might be a good idea to consider a 15 year loan over a 30 year depending on your current financial situation.
Make More than the Minimum Payment
Although this seems like an obvious idea, many home owners in fact do not make more than the minimum monthly payment. If you are able to afford more every month, then it would be wise to put it towards the loan. By making more than the minimum every month, you are putting more towards the principal which will save you money over the course of the loan and would allow you pay off your home quicker and helps avoid extra interest.
Switch to Bi-Weekly Payments
By switching to bi-weekly payments, this allows home owners to make a full extra payment every year. Most home owners make 12 full payments, but going to a bi-weekly system allows for 13 full payments. By doing this, homeowners will be able to pay off their loan much sooner due to the fact that more is being paid to the principal each year. If your mortgage lender allows you to do a bi-weekly payment plan, then that may be something worth looking into.
If you are home owner who did not put down at least 20% as your down payment, you will have to pay what is called private mortgage insurance, or what is commonly referred to as PMI. PMI is added to your monthly mortgage payment until you get to 20% equity. If you have to pay PMI, considering to make more than the monthly payment would be a good idea, as the extra amount would go towards the principal, thus bringing the loan amount down and equity up quicker. By doing this, you will pay off the PMI much faster than if you just made the minimum payment, which will save you money in the long run.
By refinancing your loan, you can save a great deal of money in the long run, and this can help pay down the loan quicker due to a potentially lower interest rate. Although the savings are substantial, you will not notice much until after you recoup the costs of the refinance, which can be a few thousand dollars. Refinancing is a great idea for those who had a high rate when they originally purchased their home, as they can get a lower rate depending on the market.
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