Tired of taking decades to pay off your mortgage? You and everyone else. Check out these tips to cut your 30 year mortgage down, possibly in half, without having to go through the expert financier’s hassle.
1. Increase your payments.
This is going to require you to take stock of the other bills and debts in your life, and determine where you can cut corners. If you are spending seventy pounds per month on a cellular phone bill, try shopping around for a less expensive plan, and shuffling your savings on to your mortgage payment. Spend a few less lunches at the cafe every month, and shuffle that cash toward your mortgage as well. The more you can pay every month, the lower your subsequent payments will need to be, you can use mortgage calculators such as the one from cbonline to work out differing repayments. Even paying as much as ten pounds more per month toward your mortgage can end up taking a few years from your payment in the long run.
2. Change your payment schedule.
If you are currently paying your bill at the first week of the month, but you do not typically earn your pay that week, you likely find yourself unable to pay above the minimum amount at that time. Speak with your banker about scheduling your mortgage payment during a different week of the month, like the week following you earning your check, allowing yourself to better budget your funds. (If you are paid for your employment on a weekly basis, this tip likely is not going to benefit you.)
3. Switch to twice monthly payments.
Making biweekly payments is a sneakier way of increasing your payments over the course of the year. The system uses the 52 weeks in the year to its advantage. With those 52 weeks, you end up paying 26 payments at half the monthly rate, which winds up totalling 13 full monthly payments throughout the year instead of 12. That one extra payment each year can end up taking five years from the life of a 30 year mortgage. This is, however, something that some bankers will charge for. Check to see if your bank will allow you to switch to bimonthly payments free of charge.
4. Refinance for a shorter-term loan schedule.
Talk to your banker about your options. Most institutions offer loans on schedules for 30, 20, 15, and 10 year payment plans. Mortgages are no exception. The shorter term your loan schedule is, the higher your payments are going to be on a month to month basis, and you do have to commit to making those payments. Higher payments might not be out of your price range altogether though. In some cases, with your 30 year mortgage refinanced to a 15 year mortgage, your monthly payments could go up only 150 pounds a month. Now, you can wait to refinance and test the waters simply by using the first tip on the list – making larger payments on a month to month basis. But, one advantage of refinancing is that interest rates are typically much lower than the originally mortgage loan.
5. Use bonuses to pay additional lump sums.
If you have an occupation that pays out quarterly bonuses, or even yearly bonuses, use that money to make an extra-large payment. Or maybe you win a cash prise in a contest, inherit a few notes from a relative. Rather than using that cash to splurge on a treat, use a chunk of it to help out with your mortgage payment.
Remember, not every method works for everyone, and you can try on multiple methods. Consult your banker for help when making a decision to change up your payment method.