Reducing Mortgage Interest
Paying off your mortgage as quickly as possible will alleviate a large financial burden and help you increase your savings through reduced mortgage interest. The following tips will show you how to pay your mortgage down quicker over the long term:
- Increase payments. Round up your current payment amounts or increase payments in line with your income.
- Maintain payment levels even when interest rates fall. More of your payment will be going toward the principal loan amount.
- Increase payment frequency. Consider splitting your monthly payments into bi-weekly payments. That will enable one extra payment per year that will be applied directly to the loan principal.
- Pay a lump sum. Paying a large sum towards the principal will help reduce interest over time.
- Do not overuse benefits.
By increasing your payments as much as possible while maintaining a realistic budget, you will slash years off your loan term. If you begin to struggle, most lenders will allow you to reduce your payments back to their original amount. However, you should not lower your payment when interest rates fall. By continuing to pay the original sum at a lower rate, you are quickly reducing the time and interest on your loan.
Only use mortgage breaks or benefits if you find yourself struggling. Taking a payment break will only add time and interest to your mortgage, which is exactly what you do not want to do.
Two additional ways to help take years off your mortgage are to increase your payment frequency or to make a lump sum payment. Both of these options mean you are paying a little more now, but in the long run it will save you money. Use the Mortgage Payment Calculator to help determine what is best for you and learn how you can save money.