8 Simple Hacks to Pay Off your Mortgage Loan Sooner

Home mortgages may seem to run forever. If you ever feel that you can never come out of the debt of your home loan, then you should certainly be looking for alternative ways to pay off the mortgage sooner. Paying off your mortgage sooner is a luxury that every homeowner would like to have as it gives them freedom from long-term financial debt.

With that in mind, we’ve compiled some of the easiest and proven ways to enable you to clear your mortgage loan at a much faster rate. While some of these tips are quite obvious, some are so fundamental that they may not occur to you. Go ahead and pick those hacks which you can comfortably afford to –

1. Make an Extra Monthly Payment every year

You can carry out this task in two ways. You can first simply ask your chosen bank to arrange for 13 installments instead of 12. The alternative way is to divide your payment into 2 biweekly payments. This contributes to that extra payment. Few financial lenders charge you in case you make a biweekly payment; so, avoid choosing such lenders. This trick will work well provided you have extra money. You can also choose to avoid doing this at times when you are going through a financial crunch. In case you prefer to make an extra payment on an annual basis, then prefer doing the same if you can get tax benefits on homeownership*.

2. Refinance your Mortgage

You can always choose to refinance your mortgage of longer tenure, say 20 or 25 years, into a loan tenure of 15 years. In case you already enjoy a lower interest rate, then avoid refinancing your mortgage and pay off the mortgage over a longer tenure period.

3. Try to hit the Principal Amount Early

Initially, you may feel that you are only paying the interest towards your mortgage loan and the principal amount remains the same. Unfortunately, this is one of the negative effects of component interest. Therefore, you need to try your best to repay some of the principal amount as early as possible to notice any marked difference in reducing the principal.

Every penny that you put into your mortgage over and above the repayment amount basically attacks the capital. This extra amount on additional repayments regularly will assist you to cut a good number of years off your loan term.

4. Have a Look at Property Tax

In a few states, financial lenders such as banks usually pay for the property tax. In turn, they pass this very same tax on you. In case the value of the property has dropped in your area then feel free to talk to a tax assessor. It is always better to get your home re-evaluated as it will help you reduce your payments. You can also try to get property tax redemption in case you are a veteran or physically disabled**. These rules vary from state by state and you need to do a good amount of local research in order to find out what would be applicable for you.

5. Downsizing

Downsizing your property can appear to be quite a drastic step to get rid of your mortgage. However, you can always consider selling off your larger property and utilize the profits from the same to buy a smaller and less expensive home. Through the profits earned by the sale of your bigger home, you can completely pay off for your new home. 

6. Rent out the Extra Space

With each passing day, individuals are now more open to the concept of sharing economy. You can easily rent out your extra bedroom, parking space, and even your garage. If you decide to go on a vacation, you can definitely consider the idea of listing your home space on Airbnb. You can use that extra money towards your mortgage payment. 

7. Always get the help of a Professional when looking for a Home

You must always consult a real estate agent while looking for a home that suits your budget. This will help you save a lot of time, effort, and money. 

The agent will successfully help you navigate the entire process. In a few cases, experienced agents can get you a home before it even hits the market. This will surely give you a competitive edge over the others. Besides, they are quite skillful at negotiating so you do not end up paying more. 

8. Maximizing your Down Payment

The most ideal way of purchasing a home is to make a down payment as close to 100% as possible. It may sound a bit weird, but you can surely enjoy your time without worrying about mortgage payments.

In case you cannot afford a higher percentage of down payment, plan to put down at least 10% at the closing table. A 20% down payment is a much better option as it prevents you from paying for Private mortgage insurance. 

Always keep in mind that the higher the down payment, the lesser mortgage you will end up paying. This, in turn, leads to a lower interest rate on the remaining mortgage and you can pay off the mortgage faster.

References:

* https://www.irs.gov/publications/p530 [For International websites]

OR

* https://www.incometaxindia.gov.in/Charts%20%20Tables/Deductions.htm [For Indian websites]

** https://www.cga.ct.gov/2008/rpt/2008-R-0627.htm [For International websites]

OR

**** https://indianexpress.com/article/india/maharashtra-ex-servicemen-exempted-from-paying-property-tax-in-urban-local-body-areas-6591131/ [For Indian websites]