Buying a house is one of the largest purchases you will make in life and your first focus will probably be on getting the best deal possible. Once you own the house, however, you may stop to think about how much you'll actually pay out over the life of the mortgage. In some instances, you'll end up paying 75 to 100 percent over your purchase price because of the interest on your mortgage loan. Shaving 10 years off your mortgage will significantly reduce your total cost by cutting out a lot that interest. There are several strategies you can use to shave off those 10 years.
Accelerate your payment schedule. Contact the lender and request a biweekly payment. At the end of each year, you will have made an entire extra payment because of the occasional five week month. This will shave 10 years off a 30-year loan.
Remit regular principal only payments throughout the life of the loan. Sending in a separate check marked "principal only" monthly, quarterly or annually, will help reduce your total mortgage. Determine what amount you want to apply to principal each year in addition to your regular payments and divide that amount into how often each year you will send a payment. For example, if you decide to send in $4,000 a year for "principal only" payments and you are going to pay quarterly, you will send $1,000 each time. If you are going to pay it monthly, however, the payments should be $333.33 each time.
Apply tax returns to the mortgage. If you receive a refund each year, you should consider applying it in its entirety to your mortgage. Again, it is important to send the money in a check separate from your regular monthly payment and clearly mark it as a principal only payment. Each year that you send your tax refund to the mortgage company can help shave 10 years off the life of the loan, depending on the amount of your refund.
Refinance and apply the money to the mortgage. If you bought your house when interest rates were relatively high and currently they are much lower, you can refinance, then keep making the original payment each month. Over the life of a 30 year loan, you will shave approximately 10 years off the total.
Take in a boarder. Taking in a border and applying his monthly rent payment to the loan as a principal only payment will help reduce your mortgage by at least 10 years over the life of the loan. Be sure to have a written contract with the border so each party knows what is expected.
- Andrew Bret Wallis/Photodisc/Getty Images
- Paying Your House Off Versus Carrying a Mortgage
- Tax Questions for Paying off Your Mortgage
- How to Pay Off a Mortgage in Ten Years
- What Is Included in a Mortgage Contract?
- How to Cut Your Mortgage by Ten Years
- Does It Make Sense to Not Pay Off a Mortgage Due to Tax Deductions?
- How do I Pay Off a Mortgage in Less Than 30 Years?
- Can You Back Out of a Refinance Before Everything Is Settled?
- Can You Sell Your Property While in Mortgage?
- The Advantages of Paying Off Mortgage Debt Before Retirement