For many homeowners, monthly mortgage payments make up the bulk of their budget, and paying their mortgage off faster could mean more money in their pockets for other things. The good news is there are many things people can do to pay off their mortgages sooner. Community West Credit Union, serving West Michigan, provides some insight into these methods.
Pay a Lump Sum Toward the Principal Balance
Using a mortgage payoff calculator, you can see just how far a lump sum can go. If you know you have extra income coming your way from a work bonus, tax refund, or another source, you could use that money to help pay off your mortgage faster. And if these windfalls tend to come yearly, it’s even better – you can plan to use this extra cash to minimize your mortgage without having to adjust your budget.
Pay Over the Minimum Amount
Every little bit counts, and this applies to your mortgage, too. Many homeowners are surprised to find out how much they save – in time, interest, and total payments – just by making payments that are slightly greater than the minimum amount owed each month.
Some homeowners choose to round their payments up. So, if their minimum payment is $950 per month, they actually pay $1,000 per month instead. This method is great if you can keep it up throughout the year, but it may not be feasible for some families. In this case, making any payment that’s greater than the minimum can help. Even if you’re only able to do this a handful of times during the year, you’re still saving throughout the term of your loan. The key is to ensure this extra money is applied to the principal balance and not the interest.
Schedule Extra Payments
Another way some homeowners pay off their mortgage early is by making one extra payment each month or one extra payment each year that goes directly toward the principal. If you can make room in your budget for this method, it can save you thousands of dollars in interest during the loan’s term.
Refinance Your Mortgage
Community West Credit Union offers multiple mortgage refinancing options including a Mortgage Retirement Loan, and they’re worth looking into for many homeowners. A Mortgage Retirement Loan offers a 10-year term and allows you to roll in other debts to reach financial freedom quicker. Refinancing can often provide a lower interest rate or shortened term to help you save more money long term. Going from a 30-year mortgage to a 10-year or 15-year mortgage will yield a higher monthly minimum payment, but you’ll pay off your principal balance and build equity faster.
Reap the Benefits of Paying Off Mortgages Sooner
Paying off your mortgage early provides more than just the peace of mind that comes with knowing one of the biggest debts you owe is repaid. Here are some financial benefits that make working toward an early mortgage payoff worthwhile:
- One less monthly payment: With a sizeable mortgage payment off your plate, there’s more room in your budget for other things. This could mean more family vacations, more money toward retirement, or reaching specific financial goals.
- Saving on interest: Every monthly mortgage payment includes some interest money. The fewer payments you have, the less you pay in interest in the long run. The interest may not seem like much at first glance, but it certainly adds up over time – paying off your mortgage early might just save you a great deal of money in the end.
- Full homeownership: Once your mortgage is paid off, you officially own your home. This means you eliminate the risk of foreclosure due to payment default during periods of financial hardship in the future.
Explore Options at Community West Credit Union
It’s important to note that refinancing may not be the best option for every homeowner. Be sure to discuss your options with an experienced lender and find the best solutions for your needs. At Community West Credit Union, we offer several mortgages and other loans for homeowners throughout West Michigan. Contact us for more information about how we can help you pay off your mortgage sooner.