For most people, the most debt they’ll ever be in in their life will be right after they purchase a home. Even if you were able to put down a decent down payment, you still will likely owe your lender tens of thousands, if not hundreds of thousands, of dollars.
However, getting out from under this debt and retaining full ownership of this home all on your own isn’t easy. But with the right plans in place, you can find ways to shave off years from your repayment period as well as thousands of dollars in savings. To help you see how this can be done, here are three tips to help you pay off your home loan sooner.
Save For Four Extra Payments Each Year
While you’ll be paying your mortgage every month, one way you can get through these payments even faster is to add in some extra payments throughout the year. While this might be a stretch for those who already have a tight belt financially, most people can put into place a savings plan that will allow them to pay at least one extra payment per year, which can really add up.
If you’re able to, DaveRamsey.com shares that you should shoot for paying an extra mortgage payment each quarter, which will come out to four extra payments per year. If you’re able to do this, you could pay off your home loan about 11 years sooner than you otherwise would have been able to. And with this early payment, you could save about $65,000 in interest over the life of your loan.
Choose A Loan With An Offset Account
To get your home loan paid off sooner, what you really want to do is pay down the principle of your loan as fast as possible.
One way you may be able to do this is to choose a loan with an offset account attached to it. According to Mark Bristow, a contributor to LifeHacker, with an offset account, any money that you put into that account acts as if it’s being taken off of your mortgage for interest purposes. So if you owed $200,000 on your mortgage but had $60,000 in your offset account, you’d only be paying interest on $140,000 instead of the whole $200,000. Under the right circumstances, this could save you a lot of money and help you pay your loan off faster.
Consider Refinancing Or Recasting Your Mortgage
Another option you might want to consider for paying off your loan fast, according to Maryalene LaPonsie, a contributor to U.S. News and World Report, is to refinance or recast your mortgage when the timing is right. Both of these options could give you much better terms for your home loan.
If you’re wanting to pay off your home loan as soon as possible, consider using the tips mentioned above to help you find ways of accomplishing this.