When it comes to the mythical down payment for purchasing a house, the number that…
If you own a home here in the Golden State, you might wonder if there are ways to pay off your California mortgage faster. And there are plenty of good reasons to do so. Maybe you want to increase your cash flow, save money on interest, or simply own your home outright. Whatever your reasons for considering it, there are several ways to pay off your mortgage faster, depending on your budget and goals.
6 Strategies to Pay That Mortgage Off
If you’re reading this hoping to learn about any loopholes or tricks to get out of paying your mortgage in full, we’re sorry to disappoint you. The only ways to pay off your California mortgage faster involve paying the full amount of the loan and whatever interest you accrue. But if you want a clever, doable plan you can follow to speed up the process, then we’ve got some suggestions for you. And regardless of the strategy that best suits your wants and needs, be sure to contact your loan servicer to find out if they allow early payoff without penalty.
Without further ado, here are some strategies to consider.
1. Biweekly Payments
If you’re like most California homeowners, you pay your mortgage monthly. If you have the money available, think about using it to make biweekly payments instead. By making payments twice a month, you make an extra full house payment a year, and that cuts a surprising number of months off of your mortgage while costing you very little extra each year. If you’re interested in this option, contact your loan servicer to see if they can adjust your payment schedule.
2. Extra Payments
Maybe you want to do a little more than biweekly payments. Extra payments every quarter, six months, or year will reduce both your principal and the amount of interest you pay. And you can make these extra payments only when you have the money to comfortably do so.
You can also increase each payment by a certain amount, like 1/12th, for example, to get an extra full payment in each year. So, if your mortgage payment is $1000 per month, pay $1084 each month instead. You can do whatever you want!
3. Put Any Financial Windfalls Towards the Mortgage
Are you expecting a big bonus at work this year? Is your tax refund a big chunk of change? Has a long-lost relative left you a surprise inheritance? Congrats! Before you spend it on something frivolous, consider putting it towards the mortgage. This is a great way to pay off your California mortgage faster without impacting your monthly budget at all.
4. Pay Your 30-year Mortgage Like It’s a 15-Year
Sometimes people debate whether to get a 30-year mortgage or a 15-year mortgage. While it’s not exactly equivalent, consider getting a 30-year loan and paying it off like it’s a 15-year loan. The good thing is that if your income situation changes, you’re not locked into higher payments.
5. Round Up Your Payments
Whatever your monthly payment is, just round it up to a number ending in zeroes. If your mortgage payment is $726 per month, round it up to an even $800. Simple as that. This also has the added benefit of making your monthly budget math a little bit easier.
6. Refinance Your Loan
Refinancing is a common way to reduce the length of your loan. If current interest rates are lower than the one on your original mortgage, refinancing your existing mortgage into a shorter term, like 20, 15, 10 years, etc. can shorten the amount of time it takes to pay your loan off and reduce the amount of interest paid over time. Refinancing does come with closing costs, so it’s important to make sure it makes sense for your situation. (We specialize in that at New Way Mortgage, so if you’re thinking of refinancing, get in touch.)
Talk to Professionals and Do the Math
There’s no crazy trick to get your California mortgage paid off faster, just solid plans that really work. Feel free to reach out if we can help.
Also, we are awesome mortgage pros but we are not tax professionals or financial planners, and they can be helpful in a situation like this, so reach out to them for assistance if you have tax or investment questions.