For many people, their mortgage is their single largest expense and their house their single largest investment. And even with incredibly low interest rates, the cost of homeownership adds up over 15 or 30 years (when amortized), making paying off that gargantuan debt sooner than later will lead to bigger savings and more financial freedom down the road. However, before you jump off a financial cliff and sink everything you have into your mortgage payment, consider these six tips designed to cut your mortgage repayment clock down to zero.
Every month, add a set amount that you can comfortably afford (even if it is just $15 or $25) to your mortgage payment. Make sure that extra money is applied to the principle on your loan, not your interest – you will need to specify this to the bank. Then, follow up with an online statement to make sure that the money went where it was supposed to go.
At least once each quarter (every three or four months), send in a double payment – your normal mortgage payment, plus anther full payment. This will substantially reduce your mortgage balance.
Use your tax refund wisely
Instead of spending your tax refund check on something frivolous, consider applying it toward your mortgage principal instead. If you make this a habit, you’ll see your mortgage balance dwindle year over year. Of course you’ll get the best results if you combine this strategy with a few others.
Don’t reinvest, put more on your mortgage
If you have any bonds or CD’s that are about to reach their maturity date, don’t cash them out only to put that cash right back into a similar investment. Instead, put the principal and your earnings (interest accrued) toward your mortgage, and don’t reinvest those funds in bonds or CD’s until you have paid your mortgage in full.
Use your annual bonus
If you receive an annual bonus, overtime benefits or some other windfall of cash from work – like a promotion – continue living on less and using any and all excess to pay down your mortgage. Rinse and repeat on a regular basis and your mortgage balance will fall even faster.
Apply all windfalls to your mortgage balance
Think about any inheritance, investment earnings or even gambling winnings going straight to your mortgage payment.
Eliminating your mortgage payment from your life sooner than later makes a lot of sense (and dollars), as it frees up a huge chunk of your income and will save you tens of thousands of dollars (if not more) on your mortgage, free up more of your precious equity and put you on the path to true financial independence.