• Tuesday, February 02, 2016
  • Posted by Amarasco

If you’re like most home buyers (almost 90% in 2013), then you took out a fixed rate 30-year mortgage. There are plenty of reasons to go this route, the most important of which is low monthly payments, but it’s hard to deny that 30 years is a long time.
BlogMany first-time homeowners assume they won’t stay in their home for that long, but for those that do—or who are already halfway there—owning your house outright is the ultimate end goal. There are several ways to pay down your mortgage, but as far as actual speed goes, which method will be fastest for you depends on your individual financial situation. Here are the two strategies that have worked for other homeowners in the past:
Refinance to a shorter term.
Most lenders offer 10- and 15-year mortgages, and not only can refinancing to one from a 30-year help you pay off your home faster, it can also cut down on the total amount of interest you’ll pay. If you haven’t refinanced recently, this may also be an opportunity to grab a lower rate.
There are some downsides, though. Your monthly payment will increase, and closing costs mean it may be a year or two before you actually feel like you’re saving money. If you’re already very close to the end of your current mortgage, you may want to consider another route. Because refinancing resets your amortization, the majority of your early payments will go to interest, not principle.
Pay extra.
If refinancing isn’t right for you, then your next best option is to pay more or increase the frequency of your payments. Check your contract for prepayment penalties, though. If you pay off your loan early, the bank misses out on some of the interest they expected, meaning they may try to get the money another way.

There are all sorts of creative ways to pay extra without feeling the pinch. Try:
• Waiting for tax season. This year, the average tax return is $2,893. For most people, that’s at least one mortgage payment. So instead of spending it on other expenses or treating yourself, put your refund money back into your mortgage.
• Making extra principle-only payments. Interest is front-loaded into your payments, so for the beginning of your mortgage, the majority of your payment actually goes toward interest, not your principle. Check to see if your lender allows you to make addition payments on just your principle. By paying down your original loan amount, you’ll save interest as you shorten your term.
• Paying every two weeks. Most people pay their mortgage once a month, but by splitting your payment in two and paying twice a month, you actually end up make one extra full payment a year. That doesn’t sound like much, but it can still shave years off the end of your mortgage, and save you thousands. Plus, if you or a spouse get paid bi-weekly, it can actually make things simpler.