How to Pay Off Your Mortgage Faster

Whether your first, or fifth home, paying a mortgage is a huge undertaking. It may seem like with your periodic payments that you’re barely making a dent, but there are a few ways you can get mortgage free faster! Read on for more.

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1. Pay More Than the Minimum

One of the strategies that you can use to reduce your mortgage balance more quickly is to make larger monthly payments. You may think that you would need to find a large amount of extra funds in order to make an impact in your loan payoff date, but this is not the case. When you pay off slightly more of the balance now, you are avoiding the effects of compound interest on that extra sum of money for the remainder of the loan term. By paying more than the minimum monthly payment regularly, you could potentially take years off your mortgage loan payoff date.

When you look at options for how to pay off your mortgage faster, be aware that some mortgage loans are structured with an early repayment penalty. This means that you may be assessed an additional fee if you pay off any portion of the loan balance early. Review your loan terms carefully to avoid incurring fees unnecessarily.

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2. Adjust the Payment Timeline

If you cannot afford to make larger monthly payments consistently, consider making payments every two weeks instead of every month. By doing so, you will make the equivalent of an extra monthly payment over the course of a year. Keep in mind that this could trigger an early repayment penalty in some cases. On the other hand, some lenders may work with you to restructure the loan repayment timeline if you contact them to discuss the options available to you.

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3. Take Advantage of Low Interest Rates

A 30-year fixed rate mortgage is only one of several term options available. In many cases, loan applicants can set up a lower fixed interest rate for a few years with a rate readjustment a few years later. By taking advantage of a lower interest rate now, you can pay off a larger portion of the mortgage balance sooner. This strategy also gives you the flexibility to potentially make rate and term adjustments more conveniently without needing to refinance. This enables you to take advantage of favorable market conditions periodically.

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4. Make Larger Payments When Possible

You will probably receive small-moderate windfalls from various sources over the course of your mortgage. For example, you could receive a tax refund. Any time you receive some extra money, use this to make a lump-sum payment toward the home loan balance. The cumulative impact of this practice over the course of several years can be profound. As with paying more than the minimum, you should review your loan terms carefully to avoid incurring fees unnecessarily. You may be able to make your lump-sum payment when it comes the time to refinance.

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5. Use Flexible Mortgage Structures

When you set up your home loan, you can plan ahead for early repayment by taking advantage of a flexible mortgage structure. For example, a floating mortgage allows you to make extra payments without early repayment penalties. The best time to plan for early repayment is when you buy your home. However, you could refinance your mortgage to set up a more flexible and favorable mortgage structure that supports early repayments without penalties.

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Conclusion

You can see that the loan structure and interest rate can play major roles in your ability to pay off your mortgage sooner. However making larger payments, where possible, and extra payments will also have a noticeable impact on your mortgage balance. While you can wait for tax refunds and other small injections of extra cash, you could also use your home to make extra money. This obviously only works if you’re lucky enough to own a second home!

You could rent your home through Bachcare as a holiday rental. Many homeowners in New Zealand who do so have earned up to $40,000 per year in additional income. Consider how quickly you could pay off your mortgage if you applied this extra income to the repayment of your outstanding mortgage balance.

Some homeowners in New Zealand rent out their holiday homes on their own, but you can enjoy a less stressful experience and potentially better results when you put the professional team at Bachcare to work for you. To learn more about the benefits of using your house as a holiday home and about the services offered by Bachcare, contact the team today. 

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