How to Pay Off a 30 Year Mortgage Faster?
- 1). Pay down your principal (e.g. amount borrowed) in addition to your monthly mortgage payment. Adding an extra $100 each month has been shown to reduce a 30 year mortgage by several years. The more you pay toward principal each month, the more your 30 year mortgage will be shortened.
Some mortgage experts and personal finance gurus suggest that you send two separate checks to notify your mortgage lender that your intention to pay down your principal balance. Simply write "principal only" in the memo section of your second check. - 2). Increase the frequency of your payments. By converting to a biweekly payment plan instead of a monthly plan, you are paying one additional mortgage payment each year.
This can reduce your 30 year mortgage to 21 to 22 years. - 3). Refinance into a lower mortgage rate when the opportunity presents itself, but continue to pay the same amount as before.
Keeping an eye on your local newspaper or Bankrate.com can keep you up to date of changes in 30 year mortgage rates. - 4). Unexpected money? Use it to pay down your principal balance. If you sell some stocks, receive a small inheritance or receive a generous tax return, you can use those profits to pay down the amount of money you borrowed for your home.
- 5). Refinance into a shorter term loan. A 30 year loan is great for low income or first-time home owners since you have a lower monthly payment, but you pay little toward the principal balance. By shortening the term of the loan (e.g. a 15 year mortgage), less of your money is going toward a bank's profits and more is going back into your pocket.
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