Your home is more than an address. It is the place where you relax, raise your family, cook dinner, entertain friends, and where most of life happens. Paying off your home loan gives your family added security in the future. Once your home is paid off it frees up capital for family vacations, college, and retirement. The challenge for many people is finding a way to pay off their home loan faster. Fortunately an experienced loan officer can help.
Pay Off Your Home Loan Without Using Your Entire Budget
• Refinance your existing home loan to a shorter term. Instead of having a 30 year mortgage, refinance to a 20 or 15 year mortgage. Interest rates are extremely low so now is the best time to refinance. By reducing your interest rate and loan term at the same time you will see only a minor adjustment in your monthly mortgage payment.
• Apply your tax refund to your principal balance. By making one, larger principal payment every year you will significantly reduce the amount of time it takes to pay off your home loan. Since this money is not needed to pay your monthly bills, directing it toward your mortgage will not negatively impact your family’s disposable income.
• Pay an extra $100 toward principal every month. This slight increase in your monthly payment is the same as one tank of gas or taking the family to dinner. While it may seem small it makes a big difference. On a $250,000 mortgage loan at 5% interest rate over 30 years, applying an extra $100 per month takes the pay off date from April 2043 to January 2039. This small extra principal payment allows you to pay off your home four years faster.
• Consolidate your first and second mortgage into one refinanced, low interest rate, home loan. By consolidating the two loans you will reduce your monthly mortgage payment. Apply the savings directly to the principal of your home loan and pay off your home faster.
• Refinance and lower your interest rate. Today’s rates are so low that most people can refinance and significantly reduce their monthly payment. Apply the entire savings directly to the principal of your home loan on a monthly basis.
An experienced mortgage banker can work with you to create a plan for paying off your home loan faster. By understanding your long term financial goals a lender can help you achieve them. Paying off your home loan faster is easier than you think and simply takes being diligent. Many home owners find it easier to set up automatic principal payments to come out of their bank account every month. By setting up your loan for auto pay you can take out the guess work and use an amortization schedule to tell exactly when your home loan will be paid off and you will own your home free and clear. Diligence now will set up your family for long term financial stability.