The mechanics of paying off a mortgage are not difficult. You just have to get enough money to your lender to pay off the principal. Here are four strategies for doing just that:
- Pay a little extra on the principal each month. For example, if your mortgage payment is $738 per month, you could round this up and pay $800 per month. Just make sure the lender is applying the extra money to the principal. By doing this every month, you will be paying off more principal which will also save you interest every month from that time forward. This calculator can help.
- Make an extra annual lump sum payment against the principal. You might want to wait until the end of the year to see where you stand financially. Then you can find a reasonable amount that you are able to pay, possibly several thousand dollars, and send it to your lender with instructions that it be applied to the principal.
- Make bi-weekly payments instead of the normal monthly payments. Just ask your lender to put you on this program, and you might find it a painless way to pay down your mortgage quicker. It works like this: Instead of making a full payment every month, you make a half payment every two weeks. Over the course of a year, you will make 26 half payments, the equivalent of 13 full payments. So, you have actually made an extra monthly payment without thinking about it. This reduces your interest expense and will reduce the number of years needed to pay off your mortgage.
- Just make a lump-sum payment from time to time whenever it is convenient. Have some extra money sitting around? Try making a lump-sum payment to your lender with instructions to apply it to the principal of your mortgage. Not only will this reduce your principal, but it will save you interest for the rest of the mortgage.