Owning a home is an expensive, yet gratifying milestones in adulthood. In your mortgage documents, you receive a line-by-line outline of your financing terms: the loan amount, amortization period, loan periods and whether your loan is fixed or variable. The tips offered below are 4 ways to pay back your mortgage early.
While these numbers seem set in stone, they’re actually quite flexible to higher payment options, usually at no risk to your loan.
If you have access to extra disposable income, accelerating your mortgage payments is a thought worth considering. The tips offered below can guide you towards achieving a mortgage-free future.
Set up accelerated weekly or biweekly payments
Instead of paying your mortgage on a monthly basis, check with your lender to see if you’re eligible for an accelerated mortgage. By paying your mortgage every two weeks instead of once a month, you can shorten the amortization period on your loan by years. Additionally, accelerated mortgages apply a small amount paid towards the principal on your loan.
Make yearly lump sum payments
Consider creating a special savings/deposit-only account to make an annual lump sum payment on your mortgage principal. Try making deposits of $400-700 a month for 11-12 months and then pay the entirety in December. By doing this, you’ll contribute between $4,800-$8,400 towards your principal.
Apply for a home equity line of credit
If you’re considering refinancing your mortgage, a lesser-known financial alternative to this is accessing a home equity line of credit (HELOC). Most consumers will automatically seek traditional refinancing options that incurs more debt.
However with a high equity line of credit, you can borrow an amount that reflects a percentage of your home’s accumulated equity. While this is a loan, the collateral to it rests on the equity of your home. However, the plus side is that you can consolidate debt up to a maximum of $20,000 in a revolving account. This debt can be paid off without financial penalty.
Reapply to renew your interest rate terms
If you are in the middle of a 5-year fixed term for your loan and interest rates have dropped since you qualified, consider breaking and reapplying for your mortgage to get a lower rate. While this will likely result in penalty fees, getting a lower rate can save you thousands in the years to come.
When considering these tips
Seek further advice from a financial advisor, either privately or through your financial institution. You can also take stock of monthly expenses and calculate where you can trim expenses on your own. The important thing is to ensure that you’re not at a financial disadvantage. After seeing 4 ways to pay back your mortgage early, let our team show you how we can help.
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