Buying a home is a major purchase that many people believe is a rite of passage to becoming an adult or raising a family. When you decide to take the plunge is up to you, but remember—it's important to ensure your home is an asset that you're gaining equity from, rather than simply pouring money into it.
The best financial decision you can make when it comes to buying a home is to buy one that allows you to pay off the mortgage as quickly as possible.
Wondering how to pay off your mortgage early? Here are some tips to get you on the right track!
Put down a significant down payment
20% is the recommended amount to put down on a home. But why stop at 20%? The more money you put down initially, the less you have to pay back later. So it's always wise to pay as much as you can up front.
Set a goal for 25%, 30%, or much higher; the sky is your limit. It may take you a couple more months or years to save this higher down payment. Nonetheless, you won’t regret it when you see how much you'll save on interest payments.
If you want to know how to pay off your mortgage early, always avoid putting down less than 20% on your home. I know being a homeowner might be your dream right this second. But putting it off until you can put down a significant amount will save you a lot of stress and worry in the future as you realize how quickly you can pay your mortgage off.
Try house hacking
Here's a unique method if you're wondering how to pay off your mortgage early. Earl White, the co-founder of Heroes LLC, recommends house hacking as a means of paying off your mortgage early. House hacking is defined as renting out a part or parts of your home to other people. You can then use this extra income to pay down your mortgage.
Airbnb or Apartment.com are great places to advertise your available space. Word of mouth and Facebook are other great ways to advertise your space without having to spend additional money on advertising.
Manage your payments
According to Brian Davis, co-founder of SparkRental, managing your payments efficiently is the best way how to pay off your mortgage early. Setting up automatic bi-weekly payments is a great way to manage your mortgage. The logic behind this is that instead of making a payment twice a month or 24 times a year, you will be making 26 payments a year. That's two extra payments each year!
When making a mortgage payment, include an extra $30 or $40 every time. Davis recommends that you should round up your mortgage payment to the nearest hundred if you're wondering how to pay off your mortgage early. Over time, these extra payments as well as rounding up to the nearest hundred will result in you paying off your mortgage much sooner.
Do you receive regular bonuses or tax refunds? These are a great to put toward your mortgage. Refund checks and bonuses seem to be spent up quickly, so why not put them to good use?
Remortgage your home
Sara Trezzi of Gathering Dreams has remortgaged 3 times in the last 8 years. Remortgaging is a process that could result in a lower mortgage and potentially save you thousands of dollars.
What really helped Trezzi with this process were the additions she made to her home. They increased the value of her home, which then made it possible for her to get a lower mortgage, and save almost $4,000 in a year!
Settle for less than you can "afford"
Of course, the bank would like to make a significant profit. Giving you a mortgage that you will not be able to pay off soon, is in their best interest (literally).
Trezzi notes that the bank told her that she could afford a home double the price that she has now. Keep in mind, you have your best interest at heart. There is no need to buy a home that is well above your means. Otherwise, the mortgage will be a significant sum you will have to come up with every month.
Owning a home comes with a different set of expenses than renting. At first glance, the mortgage might appear to be affordable. But once you take into account the upkeep and furnishing of your home, a lower mortgage might be more reasonable. That way you are not in a situation where you have to choose between upkeep of your home or paying off the mortgage.
All in all, paying off your mortgage will be a difficult feat. But if you're trying to figure out how to pay off your mortgage early, these resources and tips will help you actualize your goals.