pay off my mortgage faster
Building equity quickly can help you save on interest.
why pay off my mortgage early?
Most people don’t rush to pay off their mortgage just for the satisfaction of owning their home free and clear. The real satisfaction comes from saving money— potentially a lot of it—in interest. Let’s take a look at the math.
| 30-year fixed | 15-year fixed | |
|---|---|---|
| Loan Amount | $200,000 | $200,000 |
| Interest Rate* | 3.750% | 2.750% |
| APR* | 3.945% | 3.090% |
| Monthly mortgage payment | $926 | $1,357 |
| Total interest paid | $133,443 | $44,304 |
*The interest rates used in this chart are intended for comparison purposes only.
so now I want to pay off my mortgage faster. how do I do it?
While you’ll be saving cash in the long run, your monthly mortgage payments are going to increase before they disappear completely. Luckily, you have some options when it comes to how much bigger they get.
Refinancing to a shorter term is the most common and effective way to pay off your loan quickly. While most people opt for a 30-year mortgage at first, there are also 10-year and 15-year fixed-rate mortgages.
Consider a cash-in refinance. In essence, this means making a second down payment. That might not sound so appealing, but keep in mind that the more equity you have, the less you’re going to pay in interest over the life of your loan.
Make extra payments. If you’ve already refinanced, or can’t, this may be your best option. Many people choose to make half mortgage payments bi-weekly (rather than a full one monthly). This equals out to one extra full payment a year. Following this schedule you’d pay off a 30-year fixed-rate mortgage in about 23 years. If that’s still too slow, try full payments bi-weekly, or on a schedule that better suits you.
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