It’s a well-known fact that renting a house, apartment, or any other abode is a waste of money. Instead, it makes more sense to use those monthly housing payments towards a mortgage and owning the property outright at the end of the term.
The thing is, many people don’t want to spend 25 or more years paying off a mortgage on their home. Short of conveniently receiving a large sum of money from a lottery jackpot win, how else could a mortgage get paid off quickly?
Believe it or not, achieving such a goal isn’t as difficult as you might think. That’s because there are many practical and inspirational ways to pay off your mortgage quicker. The following isn’t an exhaustive list, but it’s a selection of the best ways most people can try.
Keep in mind that not all of these methods will work well for everyone as each mortgage payer will have different financial and even lifestyle circumstances. But, the good news is you’ll find at least one way from the list below that will best suit you:
Start with a cheap home
One of the biggest problems that many homebuyers have is purchasing a property that stretches their finances. Some folks, unfortunately, have a “must-have” attitude to buying homes. And it’s that attitude that can lead them to financial strife.
If it’s your first time buying a home, you might feel a little sad looking at property listings online and concluding that you can’t practically afford any of them. But here’s the thing: it is possible to buy your dream home. You just need to start with a blank canvas!
If you have an in-depth look at properties for sale in your local area, you’ll soon discover homes that are well within your price range and are in good neighborhoods. The only downside is you’ll need to renovate them.
Still, even that isn’t a downside to buying a cheap home because you’ve got a blank canvas to turn into your dream property. What’s more, your renovations will likely increase your new home’s value if you decide to sell it in the future.
You’re probably wondering why buying a cheap property equates to having a mortgage paid off quicker. There are two ways to look at this:
- Your mortgage payments will be small. If you can afford to overpay, you’ll get the mortgage paid off quicker;
- You can ‘flip’ your home for profit. Doing so means you’ll have more money for your next home’s mortgage downpayment, resulting in lower mortgage payments and a shorter term. Some people continually do this until they are mortgage-free.
Overpay your mortgage
One of the traditional ways of paying off any mortgage quicker than the initially agreed term is by overpaying it. You still make your agreed monthly mortgage payments, but you also pay an extra amount simultaneously.
There are many ways to overpay your mortgage; it all depends on which strategy works best for you and your finances. Here’s a couple of methods for you to consider:
- Fixed amount. Let’s say your monthly mortgage payment is $900. You might find you can afford to overpay your mortgage by $250 each month due to a recent job promotion;
- Percentage of salary. If you recently got a raise at work or a new job, you might decide to overpay by a portion of your monthly salary. When calculating percentages, be sure to work with the money you’ve got spare after paying your outgoings each month – otherwise, you could end up broke.
If you decide to overpay your mortgage, make sure you contact your mortgage lender to check there are no financial penalties for doing so. Yes, the ugly truth about some mortgage lenders is they’ll charge you fees for paying off your mortgage early. Crazy, right?
Check for better mortgage deals regularly
Did you know that some people stick with the same mortgage lender each year? They presumably do so out of convenience and even a sense of loyalty to the company. The truth is, those individuals end up paying more than they should for their mortgages.
It makes sense to keep checking for mortgage deals from other lenders each year. That’s because some lenders will have mortgage products with lower interest rates – resulting in lower repayments for borrowers.
But how can you use that to your advantage, you might be wondering? The answer is simple: if you pay the same repayment amount but have less interest to pay, your mortgage term will be shorter.
You may even find it beneficial to increase your monthly repayment to take advantage of exclusive low-interest mortgage rates. There is no point in sticking with the same lender for years or decades when you can pay less and close your mortgage’s balance quicker.
Pay off your other debts quicker
Most homeowners with a mortgage will also owe money to financial institutions for credit cards and loans. If you’ve got such debts, you need to devise a way of paying off those financial commitments quicker.
For instance, you could use the snowball effect to pay off one debt and use the extra money available towards paying off the next debt quicker. You’ll eventually snowball those debts away until the only thing left is your mortgage balance.
Once your other debts are clear, you can use all that freed-up cash towards overpaying your mortgage. The result is you’ll end up being mortgage-free in a significantly faster time than the initially agreed term with the mortgage lender.
Some people are under the impression that they should first pay off their mortgages and prioritize those debts instead of clearing loans and credit cards. The trouble with that approach is credit cards, in particular, take a long time to clear if there are large balances.
There’s also the issue of interest getting charged on interest with credit card balances – a term known as compound interest. That’s why it makes sense to prioritize non-mortgage debts first so you can pay off your mortgage faster.
You’ll undoubtedly have a certain standard of living in your household and enjoy many luxuries. After all: you’re earning a handsome salary, so you can afford to do that. But, if you’re determined to pay off your mortgage early, you should consider living frugally.
Some people will see such sacrifices as unnecessary or even depressing. However, if you want to have several hundreds of dollars extra in your checking account each month, it’s something you should seriously consider doing.
You don’t need to go to the extent of having a miserly lifestyle and having no electricity or heating in your home! Instead, what you can do is look for free or low-cost alternatives to the things you enjoy at the moment.
For example, you might find it cheaper to cancel your cable TV subscription and stick with Netflix or Amazon Prime Video instead. And you could set up a home gym in your garage or a spare bedroom instead of paying for eye-watering monthly gym memberships.
Another way you could live frugally might even be to grow plenty of fruit and vegetables in your garden. If you’ve got a big enough yard, you could even have a couple of egg-laying chickens to enjoy fresh, cruelty-free eggs from home and sell off any excess eggs.
Here are some other ideas for living frugally that you might want to consider:
- Sell your car and use public transport or Uber services;
- Cancel your newspaper subscriptions and read the news online for free;
- Install photovoltaic (PV) panels on your roof for free solar electricity and heating;
- Buy clothing from goodwill or discount stores.
When you lead a more frugal lifestyle, you’ll have a shock when you discover how much extra money you can raise each month towards paying off your mortgage sooner!
Rent out empty rooms in your home
If you’ve got a large home with a few spare bedrooms lying empty, one thing you can do is rent out those rooms for extra cash. You can then apply that rental income directly towards your mortgage and overpay it to reduce your term significantly.
It’s probably not a great idea for people with families in tow. But, if you live alone, it’s a brilliant way to raise extra cash and make new friends in the process. Of course, be sure to do plenty of background checks on prospective roommates before agreeing on anything!
As mentioned earlier, the above isn’t an exhaustive list of concepts to help you bring down your mortgage balance. But, they are the most common methods employed by people seeking to become mortgage-free in a short time.
Before deciding on any strategy, it makes sense to ‘crunch the numbers’ and determine which idea will work well for your financial circumstances. Also, check with your lender that you can overpay your mortgage without any financial penalties.
Thanks for reading this guide. Hopefully, you’ll find it useful to become mortgage-free sooner than you anticipate. Good luck!