For most homeowners, the mortgage represents the largest financial commitment they will ever undertake. It is a long-term investment that comes with a seemingly never-ending series of monthly payments. But what if you could pay off your mortgage faster, reducing the years of payments and the interest costs? Accelerating the buildup of equity in your home is not only financially prudent, but it can also provide you with a greater sense of security and freedom. We will explore some strategies to help you pay off your mortgage faster, allowing you to take control of your financial future.

Make Extra Payments

One of the most straightforward ways to pay off your mortgage faster is by making extra payments. This can be done in several ways:

1. Biweekly Payments: Instead of making monthly payments, make half of your monthly payment every two weeks. Over the course of a year, this adds up to an extra month’s payment. By the end of the year, you will have made 13 payments instead of 12. This will significantly decrease your mortgage.
   
   
2. Lump Sum Payments: Whenever you come into a windfall, such as a tax refund or a work bonus (or the lottery!!), consider using it to make a lump sum payment towards your mortgage. This can significantly reduce your principal balance and the amount of interest you will pay over the life of the loan. When making the lump sum payment to your mortgage servicer, make sure that you specify that the payment is to prepay your principal. This benefits you! Otherwise, the mortgage servicer may apply the funds to make future payments, which benefits them.
   
   
3. Round Up Your Payments: Rounding up your monthly payments is another way to add a little extra to each payment. For example, if your monthly mortgage payment is $1,175, consider rounding it up to $1,200. The extra $25 per month may seem small, but over time, it can make a big difference. Just make sure that your mortgage servicer knows to apply the extra money to your principal. Most online mortgage portals allow you to easily do this.

Refinance to a Shorter-Term Mortgage

Refinancing your mortgage to a shorter-term loan is a powerful strategy to accelerate equity buildup. By switching from a 30-year to a 15-year mortgage, you will not only reduce the total interest paid, but you will also pay off your mortgage much faster. Keep in mind that your monthly payments will be higher with a shorter-term loan, so make sure your budget can handle the increase. Also, there are upfront costs required for a refinance to a shorter term. Consult with your Lakeside Bank mortgage loan consultant to make sure that a refinance makes sense for you.

Avoid Too Many Refinances

Refinancing sounds like a great idea. Remember that a refinance to a lower rate will reset the term of your mortgage back to thirty (30) years. By resetting the term, you are decreasing the amount of principal paid off in each payment. If you are going to refinance, make sure that you are going to save enough money by lowering your rate that it is worth it and avoid refinancing too many times. Borrowers who refinance too often are always at the beginning at a thirty-year mortgage. When you refinance, consider lowering your term to 25, 20 or 15 years to pay down more principal and shorten your loan term.

Make Additional Principal-Only Payments

When making extra payments, be sure to specify that the additional funds should go toward the principal balance of your mortgage. This is crucial because it reduces the amount you owe and lowers the interest that you will pay overtime. Check with your mortgage servicer to ensure that there are no prepayment penalties or restrictions on making additional principal-only payments. Prepayment penalties are very rare so this should not be an issue.

Increase Your Monthly Payments

If you have the financial flexibility, consider increasing your regular monthly payments. By paying more each month, you will reduce your principal balance faster, and this means paying less in interest over the life of the loan. Even a small increase in your monthly payment can make a big difference in the long run.

Make an Annual Extra Payment

In addition to your regular monthly payments, aim to make one additional full mortgage payment each year. You can do this by saving a little extra money each month or by allocating a portion of your tax refund for this purpose. This annual extra payment can significantly accelerate the payoff timeline.

Cut Expenses and Redirect Savings

Take a close look at your monthly expenses and see where you can cut back. Reducing non-essential spending can free up more money to put towards your mortgage. Channel the money you save into making extra mortgage payments, and you will be surprised at how quickly your mortgage balance decreases.

Create a Dedicated Mortgage Payment Fund

Open a separate savings or checking account exclusively for making extra mortgage payments. By creating a dedicated fund, you can ensure that you do not accidentally spend the extra money intended for your mortgage on other expenses. This can help you stay disciplined in your efforts to pay off your mortgage faster.

Invest Windfalls Wisely

When you receive unexpected windfalls, such as an inheritance or a financial gift, consider using a portion of that money to pay down your mortgage. This can make a significant dent in your principal balance and help you reach your mortgage payoff goals faster.

Rent Out Part of Your Home

If you have extra space in your home, consider renting it out. Whether it is a spare bedroom, a basement, an in-law suite or a parking spot, the rental income can go directly toward your mortgage. This additional income stream can help you pay off your mortgage faster while also providing a financial boost.

Seek Professional Guidance

Before implementing any mortgage acceleration strategy, it is crucial to consult with your Lakeside Bank mortgage loan consultant. They can help you assess your financial situation, determine which strategies are most appropriate for your goals, and provide guidance on making informed financial decisions.

In conclusion, paying off your mortgage faster is a smart financial move that can bring you peace of mind and substantial savings in interest costs. By using a combination of these strategies, you can take control of your financial future, reduce your debt, and accelerate the equity buildup in your home. Remember that the key is consistency and discipline. Over time, your efforts will be rewarded with financial security and the freedom that comes with being mortgage-free.