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How I shaved five years off my mortgage with one simple strategy

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The idea of ​​paying off a mortgage may seem like the point that it may not exist so far. Especially if many mortgages have been growing for 30 years.

Some financial experts say that other financial goals should be prioritized rather than rushing to repay a home, but what steps can be taken to significantly reduce mortgage length and cost? There are still some.

When I bought my first home in January 2022, I aimed to repay it in less than 30 years. The only real way to do that was to put more money in the house.

Shortly after I bought my house, I realized that I could pay my mortgage every other week instead of paying only once a month. By making this small adjustment, we were able to reduce the 30-year mortgage repayment period to one of about 25 years. This saves over $ 40,000 in interest along the way.

Here’s how biweekly mortgage payments, along with some other strategies, can help you repay your home faster.

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How Biweekly Mortgage Payments Can Save You Money

By paying your mortgage every other week, you will be paying your mortgage every two weeks instead of once a month. But how can you save money by doing that?

With the traditional repayment plan, you pay once a month, so you pay a total of 12 times a year. With a biweekly repayment plan, you pay every two weeks. This means that you will have 26 payments in 52 weeks of the year.

By paying your mortgage on a bi-weekly schedule, you will be spending a little more cash on your mortgage during the year than if you were paying on a monthly basis. Paying every two weeks will slightly speed up the repayment process and reduce the likelihood of interest accrual. So, in the end, not only will you save tens of thousands of dollars in interest over the entire term of your loan, but you’ll also reduce the time it takes to fully repay your home.

For example, suppose you have a $ 400,000 30-year mortgage with a 4% interest rate. By paying monthly, you’re paying $ 1,910 a month, or $ 22,920 for a year.With Biweekly plan, Pay $ 955 every two weeks. That’s a total of $ 24,826 throughout the year.

Depending on the repayment schedule, the difference in total interest paid on that $ 400,000 mortgage is as follows: With a monthly payment, you will pay $ 287,478.03 interest for 30 years. However, if you switch to bi-weekly payments, you will be paid $ 242,371.40 as interest, reducing your repayment period to just 26 years. Your net savings are $ 43,809.11 and you will be 4 years off your mortgage if you pay every other week.

To start this type of repayment plan, talk to your lender about registering for biweekly payments. Please note that some lenders will charge the borrower to do this. Therefore, be sure to ask about relevant charges and weigh them against potential savings. You can also see if your mortgage lender is subject to prepaid fees or penalties.

Other Ways to Repay Your Mortgage Faster

For some, Run out of debt Is the ultimate economic goal and mortgage repayments can be a major milestone. If biweekly payments don’t suit your financial needs, consider one of the following strategies.

1. Round up

If your mortgage payments are odd, a relatively easy way to shorten your mortgage life without financially burdening your budget is to round up your payments.

For example, if your monthly payment is $ 2,730, consider rounding up from $ 70 to $ 2,800. With just that small addition, you can save thousands of interest over time and reduce your mortgage repayment time.

2. Charge more to your investment account

A little more patience, Enjoy investing in the stock marketYou can take that round up and instead turn to investing in taxable Brokerage account Through mediation such as Vanguard Also Fidelity..

For example, suppose you receive the same $ 70 per month from the example above and invest in it. S & P500 Index Fund If you have an average annual revenue of 8% over 25 years, that’s $ 61,108. This is a profit of over $ 43,000 from a donation of $ 21,000.

After a certain amount of time, you can withdraw your return on investment and use it to make additional large mortgage payments. However, keep the following in mind: Profit from the sale of shares is taxable..

3. Refinancing if possible

If you I bought a house Refinancing may make sense if you have high interest rates or if you have repaid a significant portion of your mortgage. Prices have risen sharply these days, but it may be worth chatting. Mortgage lender like that Chase Bank, Ally Bank, PNC Bank Also SoFi Check out the options if you want to track your paydown quickly.

Chase Bank

  • Annual rate (APR)

    Apply for a personalized fee online.Includes fixed and floating rate mortgages

  • Loan type

    Traditional loan, FHA loan, VA loan, DreamMaker℠ loan, jumbo loan

  • Clause

  • Credit required

  • Minimum down payment

    3% when moving forward with a DreaMaker℠ loan

SoFi

  • Annual rate (APR)

    Apply for a personalized fee online.Includes fixed and floating rate mortgages

  • Loan type

    Traditional loan, jumbo loan, HELOC

  • Clause

  • Credit required

  • Minimum down payment

For example, if you aggressively repay your home within the first few years of a 30-year mortgage, you can refinance to a 10- or 15-year mortgage with lower monthly payments and interest rates, or even. Private mortgage insuranceOr PMI is a cost that can be incurred as a result of paying less than 20% as a down payment.

Professional Tips for Quickly Repaying Your Mortgage

If you’ve been paying more than your monthly minimum payment for several years, it may be worth considering a mortgage recast. This effectively spreads the remaining balance over the rest of the loan, giving you more flexibility in payments. My loan servicer charges $ 300 to do this, so be sure to run the numbers to see if it’s worth doing this.

Conclusion

Buying a home can be a big investment, but after all, paying a mortgage is your debt. If you want to get rid of debt, you can get there even faster by using one of the above strategies.

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Editorial Note: The opinions, analyzes, reviews, or recommendations contained in this article are for Select editorial staff only and are not reviewed, endorsed, or otherwise endorsed by third parties.

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