By Jonathan Roisman, NextAdvisor.com
There are a lot of benefits to paying off your mortgage faster. For one, you'll save money on interest charges, which can be tens of thousands of dollars over the course of a loan. When you pay off your mortgage faster, you'll be able to use that extra money for a number of other useful things, such as using it to retire early, travel the world, fund your children's or grandchildren's education or leave to family, friends and charities. Here are tactics you can use to pay off your mortgage faster.
1. Pay biweekly
It might not seem like much of a change, but there is a big advantage in paying half of the payment every other week instead of the full payment monthly. When you're on a monthly payment schedule, you'll be make 12 payments per year. With the biweekly schedule, you'll make 26 (since there's 52 weeks in a year) partial payments in a year, or the equivalent of 13 months in one calendar year. Without even factoring in the interest you'd save, you'll pay off your home in a minimum of two and half years earlier over the life of a 30-year mortgage. Although you can make extra payments towards the principal on your own, it's best if you set up this payment plan with your bank so the payments will count as your regular payment. Many banks will set this up for you for free, although some charge. Luckily, it's usually rather easy to set up this payment plan with the bank on your own.
2. Focus your savings on paying down your mortgage
This might not sound exciting, but if you can find an extra $100 per month to pay toward your mortgage, you'll save thousands of dollars in interest payments of the life over the loan, as well as getting out of debt faster - in some cases years faster. Another way to pay more each month is to round up. Say your mortgage is $1,760/month. Pay $1,800 each month instead. It's likely your brain is already rounding up, so it's smart to just add the money you're already deducting mentally each time you pay. It's important that you make sure your extra money is going toward paying down the principal, and that it's not being credited to next month's payment - you won't save on interest that way.
If you refinance to a 15-year year mortgage, you're committing to higher monthly payments, which are a good thing if you want to pay off your loan faster. It's important that you analyze the numbers and make sure you can afford it before agreeing to it, however. If you can pull it off, it might well be worth it. You'll not only save a lot of money on interest payments, but you'll be out of debt much faster.
Even if you're not willing or financially available to commit to a shorter-term mortgage, refinancing is likely a good option for you. This is because you'll likely get a lower interest rate - after all, rates are really low right now - and if you continue to make the same amount in payments as you did with your previous loan, you'll be able to pay that off in no time.
For help on determining what kind of home loan or refinance is best for you, check out our mortgage page and use your mortgage calculator. You'll be able to estimate different monthly costs depending on your loan, as well as compare interest rates from competing banks.
This blog post originally appeared on NextAdvisor.com.
The Morning Email helps you start your workday with everything you need to know: breaking news, entertainment and a dash of fun. Learn more