There are several ways to pay down your home loan faster
Cervone Deegan + Associates knows that when you close on your new home and have signed on the dotted line committing to a 30 year or similar loan term it can seem a bit daunting. While you are fully committed to paying it off, you aren’t forced to stay with that mortgage for that long. Other than of course selling your home for a relocation to another property, there are other ways you can work with your mortgage to shorten the duration of its term. If you are in a position where you have a healthy surplus of cash flow and a shorter term works better for your long term goals, then here are a few considerations.
Instead of paying your mortgage only once on the first of the month, try paying half of it every 2 weeks. By doing this you will make 1 extra payment at the end of the year which can typically shave roughly 5 years off the life of your loan. Check with your bank first to make sure they accept this type of payment strategy.
One extra annual payment
Similar to the outcome as the first idea, instead of the biweekly payments try making just 1 extra payment per year. Depending on how you receive your income maybe a year end bonus time or tax return time may make this easier to handle.
Add regularly to the principal
Perhaps one of the most common practices is to pay more each month towards your principal. Many banks will even have this option on their payment coupons for anyone who wants to take advantage of this. Again make sure your bank offers this as well without penalty before you begin, but most do.
Lump sum principal payment
This option is another one that is great if your income supports it easily. Some receive work bonuses at the end of the year for example where taking a portion and putting it towards your mortgage can help you save in the long run. This amount can be anything you are comfortable with and not necessarily just an extra payment’s worth.
This option is really trading one mortgage for another, however, if you can get a much lower interest rate then you will absolutely save a lot of money in the long term.
Shorter term mortgage
This goes hand-in-hand with refinancing where you want to align what you can comfortably afford with your future goals. Retirement is often a milestone where homeowners want to either move to downsize or stay in their home mortgage free.