[T]he secret to financial independence and good credit is having enough money to live on and for emergencies. One way to ensure this is by reducing your debt. The biggest debt for many is with their home. A mortgage not only comes with a higher payment, but it is often set up for 30 years. However, there are ways to pay off your mortgage sooner and become debt-free.
Make Payments Twice a Month
You can set up your mortgage to take biweekly payments instead of once a month. Because you are paying every two weeks instead of once a month, you end up making one extra payment each year. This is an ideal option for those who don’t have a lot of extra cash to pay down the mortgage, but they can make a half payment every two weeks.
While this doesn’t sound like a lot, it can really add up because you also cut down on how much interest you’re paying. You will pay off your loan between 5 and 10 years earlier.
Make One Extra Payment Every Year
Pick a month to send one extra payment each year. This will not only reduce the principal of the loan, but it will also reduce the amount of interest you pay. One plan is to use a tax refund for the extra payment. If you have a bonus from work or other money that comes in besides your regular salary, this is a good use for it.
You can also save money each month out of your paycheck to put towards the extra payment. Make a sacrifice like not getting coffee from your favorite coffee shop one morning each week or not going out to dinner once a month and put that away until you have the equivalent of one mortgage payment.
Add Money to Every Payment
You can also pay a little extra each month with your mortgage payment. Add in 10 percent or even 5 percent over the regular payment. In time, it will add up to a full payment and help reduce your overall amount owed.
A side benefit of doing one of the last two options is that if you get into a financial bind, you’re often paid ahead so you aren’t counted as late on a payment. And paying off your mortgage sooner means you accumulate more equity and can become debt-free.
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