It doesn’t take a genius to know that buying a house is an expensive proposition. In the United States the average house costs around $350,000. With most mortgages being 30 years, and having a 3.5% APR it can seem like a daunting task to pay it off in its entirety. There are however several tips and tricks to use to pay it off, possibly even early. Here are a few of them you can use.
1. Don’t buy a house you cannot afford
The first step to being able to afford to pay off your mortgage is being able to afford the house you are buying. While it’s the dream to own a big beautiful house, it’s important to spend within your means. While the monthly payment may seem reasonable at first, some mortgages are set up so that the payments increase over time. Make sure research is done so that you know whether or not you will be able to afford the mortgage.
2. Pay extra when you can
Paying only the minimum amount of money towards a payment will cause any trouble, but it also doesn’t prevent anything. When possible, pay more than the minimum payment to pay a loan off earlier, and pay less in interest. For example, on a $220,000 30 year mortgage at 4% APR, making an extra payment each quarter will save $65,0000 in interest, and pay off your loan 11 years early. While this may be bit much for those just getting by, everybody should do what they can to pay off their debts as fast as they can, even if it means not taking that Hawaii vacation.
3. Refinance
If possible, refinancing a 30 year mortgage into a 15 year one would be a great way to lower your interest rate. A few tenths of a percent may not seem like much, but on a purchase as large as $350,000 or more in some places, it could mean a difference of hundreds or even thousands in some cases. Besides, being debt free in 15 years rather than 30 is an intriguing possibility. Nobody wants to be in debt for that long.
4. Downsize your home
This might only be a possibility for few. Oftentimes near the end of a mortgage, once the kids have left the nest, people end up with a house with a bunch of empty rooms. While extra space is nice, and echoes are cool, it’s a waste of money to live in a house that is too big. Selling a house to buy a smaller, cheaper one could free up the money one needs to pay off their mortgage, or at the very least make it significantly smaller.
5. Reduce expenses, and put those savings towards your mortgage
Nearly everybody could be a bit more frugal. Whether it’s packing a lunch, or making your own coffee, there are savings to be had. While that $5 latte from Starbucks is delicious, getting one once a week rather than every day would be easy, and save over $1000 a year. That $1000 would be great to put towards a mortgage payment and would certainly help in paying off a mortgage earlier.
Debt can put a burden on not only your wallet but your psyche. With these tips however, anybody can help make sure they don’t start in over their head, and pay off the debt early. Get that financial monkey off your back by using these tips!
