You’ve crunched the numbers, got approved, and purchased your home. Now that you have a home loan, you’re likely making regular monthly payments, right? But did you know that over the life of your mortgage, you won’t just pay back the amount you borrowed—you’ll also pay a significant amount in interest? This means the total cost of your home can be much higher than the original loan. To reduce this amount, consider implementing strategies to lower your payments and pay off your mortgage sooner. Here are some tips to help you achieve mortgage freedom faster:
1. Refinance Your Mortgage
What is your current interest rate? Keep an eye on interest rates, and if they drop significantly, it might be the right time to refinance your mortgage. A lower interest rate can reduce your monthly payments. To maximize the benefits, continue paying the same amount you were paying before refinancing. This way, you’ll pay down your principal faster and reduce the total interest paid over the life of the loan.
2. Pay More Each Month
Before you begin, confirm that your loan doesn’t penalize you for early repayment. If there are no penalties, consider paying more each month or making extra payments when you have additional funds. This strategy reduces your principle faster, which means you’ll pay less interest overall. Here are some ways to implement this:
- Round Up Your Payment: If your monthly payment isn’t a round number, round it up to the next $50 or $100 increment, depending on what fits your budget.
- Increase Your Payment Gradually: Start by adding a small amount, like $5, to your payment each month. Over time, these incremental increases can make a big impact.
- Make One Extra Payment a Year: Divide your monthly payment by 12 and add that amount to each month’s payment. For example:
- Monthly payment: $2,000
- $2,000 / 12 = $166.67
- Round up to $170 and add it to your monthly payment, making it $2,170.
- Over a year, this adds up to an extra month’s payment.
- Cut Subscription Services: Evaluate your streaming and subscription services. Could you cancel or cycle through them? For instance, subscribe to Netflix one month and Hulu the next. Use the money you save to make additional mortgage payments.
- Use Your Tax Refund: Instead of spending your tax refund, consider applying it to your mortgage. Even a portion of your refund, combined with other strategies, could save you thousands in interest.
Final Thoughts
Your mortgage is one of your largest expenses, and while making regular payments on time maintains your credit score, paying it off early can save you thousands in interest. This also frees up money for home updates or other financial goals. Taking steps to reduce your mortgage principle is a smart way to stay ahead financially.
If you’re ready to explore refinancing options or need advice tailored to your financial situation, call one of our mortgage loan experts today. Let’s work together to help you achieve financial freedom!
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