by Semify
Mortgage debt is not always a bad debt to have. It means you have invested in real estate and are not paying rent. You have a real chance at building equity in your property and ultimately enjoying a nice return on your investment. While mortgage debt is not “bad” debt, it is still debt. The quicker you can get out of mortgage debt, the better. Here is how to get out of mortgage debt faster.
1. Refinance for a Shorter Term
If you took a thirty-year mortgage like most Americans, you can refinance your mortgage for a shorter term. You can also pull out some equity when you refinance to pay for home improvements. According to Angi, about 80% of homes in the United States need upgrades or improvements because they are over twenty years old.
Refinancing for a shorter term will increase your monthly payments and get you out of mortgage debt faster. Shorter terms can save you thousands of dollars in interest payments. If the interest rates are low, it is a good time to refinance to get out of debt faster.
2. Make an Extra Payment
If you can make an extra payment in any amount toward your mortgage, you can pay down the principal faster and reduce the interest you pay over the life of the loan. Any payment over your regular monthly payment will go towards the loan’s principal. It is an easy way to pay off mortgage debt faster.
If you get a raise at work, use that money to make an extra payment. Any extra money can go toward your mortgage to pay down debt faster. There are significant savings to be had by making an extra mortgage payment when you can.
3. Use Windfalls Wisely
There are times throughout the year that you may see some financial windfalls. For example, if you receive a tax refund at tax time, use it to pay down your mortgage. If you get a bonus at work or face any financial windfall, put that money toward your mortgage.
Making it a habit to use financial windfalls to pay down your mortgage will pay your mortgage off faster and get you out of debt faster. Large lump sum payments can significantly dent your principal, lowering the interest you pay over the life of the loan. You will save money and own your house outright sooner.
4. Round Up Payments
If your mortgage is $1,850 monthly, pay $1,900. Rounding up payments can help reduce the mortgage principal faster. Paying $50 a month extra can save you over $20,000 in interest and reduce the life of the loan by two years.
Rounding up payments can be easier than handing over a windfall or making an extra payment. Rounding up your mortgage payments is easier to work into your budget. Most people would not miss $50 or $100 a month.
5. Bi-Weekly Payments
Instead of making monthly payments, split the payments into bi-weekly payments. Making bi-weekly payments will equate to making 24 payments a year instead of 12 payments a year. This can help you to pay down the debt faster.
Cut back on expenses to free up extra cash for your mortgage payments. According to Energy.gov, repairing your ductwork can reduce energy consumption by 30%. That energy savings can fuel an extra mortgage payment.
Make sure you are balancing your budget. It is important to pay down mortgage debt as fast as possible but not at the expense of letting other debt pile up. According to the Department of Justice, creditors can take about 25% of your pay if you fall behind. Learn more ways to pay down your mortgage and become debt-free today.
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