How to Reduce the Length of a Mortgage
- 1). Analyze your budget and find a realistic amount you can increase your mortgage payment by. It likely will take years to pay off your mortgage, even if you double the payment amount. If your mortgage is for $100,000 with a 6 percent interest rate amortized over 30 years, doubling your payment will still require more than nine years of payments. Your budget must allow you financial flexibility during those nine years.
- 2). Obtain quotes from mortgage lenders to determine if you can refinance and lower your interest rate. Refinancing to a shorter term or lower interest rate will help accelerate your payoff even further. Talk to several lenders and negotiate your loans terms. Consider shorter loan terms for your refinance. If your new loan requires minimum payments that pay off your home in 10 years, you are more likely to make them. If you worry about having the discipline to make the extra payment, a shorter-term mortgage will force you to make the extra payments or risk damaging your credit.
- 3). Live with the payment for six months before you commit to making the extra payments to your mortgage. Put the excess payment into savings and see if you like your lifestyle without the extra payment. If you find your lifestyle is hampered, or if you have to use the saved funds for required items like groceries or gas, then consider revisiting your budget. Paying off your loan early can save you significantly, but it shouldn't cut into your required living expenses.
- 4). Commit to making the payments. Talk to everyone in the household and agree this is a priority. You want everyone to agree with this goal. Revisit the budget every six months to see if it needs adjustments. Automate the payments if possible. Many lenders allow an auto draft of your mortgage payments. If your lender allows you to automatically set up extra payments, take advantage of this option.
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