How to Pay Down your Mortgage Faster

Whenever there is a decrease in interest rate people stop depositing their savings with the banks and instead start utilizing these savings to refinance their mortgages to consolidate debt, renovate their homes and invest more in the real estate business to move up the property ladder. If you are also looking forward to refinance your mortgage and pay it off well before your term is over, here are a few proven strategies you can adopt to increase your savings and pay the balance quickly.

Refinance to a 15-year mortgage

The simplest way to paying off your mortgage twice as fast is to refinance it from a standard 30-year mortgage to a 15-year term. Refinancing the mortgage from the longer term to a shorter one would mean larger payments each month at a lower interest rate. While the decrease in interest would save you thousands of dollars in interest payments, you should stay prepared for higher monthly payments and less flexibility.

Use pay raise on your mortgage

To combat the financial burden of refinancing mortgage, try finding sources of extra cash to balance your budget. One way to find extra cash for the revised monthly mortgage payments is to apply for a raise. Once your pay goes up, put the same percentage of your income towards the mortgage. It would be a better idea to put all of your raises towards your mortgage balance, but only if you can avoid the influence of inflation on your lifestyle.

Remember this strategy works best for the employees who get pay raises on regular basis. If you do not see your monthly salary increasing in the near future, this strategy might not work as well for you.

Pay extra each month

Fifty dollars might not seem much when seen from a budgetary point of view. However, consistently adding such a small amount to your monthly mortgage payments can make a huge difference. The biggest challenge when adopting this strategy will be your determination to keep making these extra payments, since it is voluntary and up to you to stick to the strategy.

Use cash windfalls to pay lump sums annually

Instead of paying a small chunk each month, try saving this money and pay a large lump sum at the end of the year. You can also add a couple of bonuses to these savings and repay as much as possible. Most lenders allow mortgage holders to pay 20 percent in lump sum annually, without any penalty.

Make biweekly payments

You can also achieve the goal by increasing the frequency of your payments. To increase the frequency of your payments, opt for accelerated bi-weekly mortgage payments. This will allow you make extra payments every year, and in the end you will be able to repay your mortgage before the term is over.