For some people, a loan is a considerable investment that they make in life, while to others, it could be a significant burden. It’s always advisable to pay off the mortgage the soonest as possible to save on money.
Besides, you get to have financial stability since you get to pay a lower interest rate. Here are smart ways to pay off your mortgage.
Have Biweekly Payments
Try splitting the monthly installments into two portions then make two payments each month. Some lenders will offer you an opportunity to have biweekly payments instead of a one-time monthly payment. This strategy ensures that you pay off the mortgage faster; hence you save money. On the contrary, some lenders might fail to accept biweekly payments; therefore, you should explore whether the option is available with your lender before considering it an option. If your lender accepts the arrangement, you will have to plan your monthly budget to cater for the payments.
Debt Consolidation
Debt consolidation is an effective strategy that protects you from the ever-increasing interest rates. Some lenders offer their clients the option to consolidate their loans, and this way, you get to place all your debts under one umbrella. Mortgage repayment experts at https://jaketaylor.com/how-to-pay-off-your-mortgage-sooner/ often advise borrowers to identify debt repayment strategies that would enable them to pay off their mortgage 4-12 years sooner. You might be unaware of the percentage of payment that goes towards the interest and the fraction that goes towards the principal balance; debt consolidation puts all debts in one basket; hence you can monitor the amount that goes towards debt settlement. Besides, your lending agent will offer you a lower interest rate on your consolidated loan; therefore, you can focus on repaying one huge lump sum, instead of focusing on debts from different lenders.
Recast the Mortgage
Recasting is a viable strategy for reducing the interest rate, and it ensures that you repay the loan well in advance. Some lenders don’t offer their clients the recasting option, therefore, inquire. Recasting is an option that you should explore if you intend to make a substantial mortgage repayment. With the option you first make a lump-sum payment that goes towards settling the mortgage, the lender amortize your loan, resulting in lower interest rates and monthly payments.
Refinancing
Through refinancing, you can switch to a short term repayment strategy or secure a lower interest rate from your lender. If your lender offers you a lower interest rate and you can maintain the monthly payments, most of your money goes towards debt repayment, and this way, you get to save money and repay your debt faster.
Use an Internet Banking Option
Some people delay repaying mortgages since they are always occupied, and they don’t have time to visit the bank. Internet banking is a cheap and convenient way of making payments, and besides, it’s an ideal tool that will enable you to organize your finances in a way that fits your schedule.
Split The Loan
Most borrowers are often concerned about the ever-increasing interest rates; hence they fear taking mortgages. A split mortgage could be your solution since it allows you to take part in the loan as a variable, while the rest is a fixed loan. Split loans will enable you to hedge on whether the interest rates increase or reduce, and if it increases, you will be confident since you know that part of the loan is fixed. If the interest rates rise slowly, you can use the loan’s variable option flexibility and repay your mortgage.
Allocate Extra Income Towards Mortgage Repayment
Sometimes you get extra income in the form of a tax return, a bonus, an income raise, inheritance, birthday cash, credit card rewards, or you might be lucky and win a bet. Well, consider channeling all the extra money towards mortgage repayment.
Retire the Fixed Income
If you have made investments in GICs or bonds, you can use them to settle the debt upon maturity. Retiring the fixed income is a strategy that involves trading a low-risk investment for another. This way, you don’t take risks in the future, unexpected returns.
Regular Loan Reviews
Loan reviewing is essential since it will help you analyze the effectiveness of your repayment schedule, and also get to correct trends that waste your money as you strive to settle the mortgage.
Have Extra Mortgage Repayments
Inquire from your lender whether they charge a penalty if you repay your mortgage earlier before you employ this strategy. Before you make the extra mortgage payment, inform your lender that the extra payments are meant for the principal amount and not the interest. If your lender applies for the extra payments on the interest, you will end up losing money. Besides, you can try settling the mortgage immediately when the interest rates are at their peak. You might fail to realize it, but most of the monthly installments at the start of the repayment are channeled towards the interest and not the principal amount.
Reduce Your Expenditure
Cut back on luxuries and channel the money towards settling the bank statement mortgage. If you spend money on morning coffee, beer, cigarettes, or fancy that afternoon chocolate fix, try and cut back on such luxuries. With time, you will save more money, and you get to repay the loan faster.
Negotiate a Suitable Interest Rate with your Lender
Given the current global financial situation, it would be ideal for renegotiating the credit terms with your lender. During times of economic crisis, people lose jobs, and your lender might listen to your plea if you confront them. Besides, mortgage services can advise you on areas where you can place your focus to ensure that you save more, and they can guide you on how to negotiate with your lending agency. If you have a good work history and a good credit record, you will have the upper hand during the negotiations.
Everyone struggles to achieve financial freedom; hence, paying off a mortgage should be your greatest priority. The above strategies are easy to employ, and they will help you settle your debts quickly. Consider making extra payments, and if things go south, talk to a professional financial advisor who will help you handle the situation.