Details on Paying Mortgages Off Early, Part 2

paying mortgages off early

In part one of this two-part blog, we went over some of the factors you should consider if you’re thinking about attempting to pay down your mortgage early. This isn’t always the prudent financial move, even if it seems like a net positive in most cases where it’s possible, but there are plenty of situations where it can be a big benefit to your finances.

At Altius Mortgage and our partners at Mortgage Ogden, we can help you understand the various options at your disposal here. While refinancing your mortgage might be the simplest way, and we’ll list some choices you might have available here, there are also several other approaches you might be able to take. Here’s a look at various tactics for paying a mortgage down early if you’ve decided this is the right move.

Refinancing

Firstly, there are several refinancing situations that might be possible to help you pay your mortgage off early:

  • Lower rate: In some circumstances, you can refinance to a lower-rate mortgage – but continue paying your old payment number off, leading to an early completion.
  • Shorter term: You may also be able to refinance to a 15- or 10-year term with higher payments.
  • Mortgage insurance: If you’re using the FHA mortgage program with mortgage insurance, you might be able to refinance out of this program and drop the insurance payment.

Additional Payments

  • You can make extra payments on top of your monthly amount – be sure to specifically target these payments toward your principal debt.
  • Biweekly: Some people choose to make these payments biweekly instead of monthly, adding up to 26 payments per year rather than 24.
  • Rounding up: A slower way of paying down mortgages earlier is by rounding payments up to some nearby round number.

Additional Income

There are several situations where you might have increased income or a windfall that can help here:

  • Your salary rises and you are able to apply the additional income to your mortgage.
  • You receive a sizable tax refund that you can apply to the principal balance.
  • You can host a garage sale or similar event to raise extra funds.
  • Consider cutting the cable cord or eliminating other unneeded expenses.
  • Receive a no-interest loan from a family member or friend.

Rental Situations

  • Consider finding a roommate or multiple renters to increase your income and pay down the mortgage.
  • Put the property on Airbnb, particularly if you travel often and have periods where you aren’t home.
  • Rent a garage and use proceeds to pay the mortgage early.

Other Options

A few other approaches you might be able to take here:

  • Consolidate two or more loans into a single one to get a blended rate.
  • Put more money down in advance, avoiding private mortgage insurance and getting a lower rate.
  • Use credit card rewards and points, or bank sign-up bonuses, to pay balances.

For more on how to pay down mortgages early and whether this is the right move for you, or to learn about any of our mortgage loan services, speak to the staff at Altius Mortgage and our partners at Mortgage Ogden today.

Details on Paying Mortgages Off Early, Part 1

paying mortgages off early

For many homeowners, the thought of paying off a mortgage loan early can be a tantalizing one. There are many home loan situations where paying the balance off early will bring you significant savings in total interest paid over the life of the loan, plus other potential benefits.

At Altius Mortgage and our partners at Mortgage Ogden, we’re here to help with all related areas, including a few refinancing options that might offer this result. But we’re also here to remind you that, in some situations, paying early might not make the most financial sense for you (there might be other cases where loan contracts actually prohibit it, but we’ll leave that for another time). In this two-part blog, we’ll first examine whether paying down your mortgage early is the prudent move based on your finances, plus then dig into some non-refinancing tactics at your disposal.

Other Uses for Money?

While it will definitely feel good to see a zero balance on your mortgage, there are several situations where using your available funds for this isn’t actually the optimal route. One common example here is if you have other debts, such as a car or student loan, that comes with a higher interest rate than your mortgage – you should always pay down the highest-rate interest loans first as long as you’re avoiding penalties for all your debts.

In addition, however, there might be several other related circumstances. Mortgages are very cheap on the current market, meaning many forms of investment might actually be better for your long-term financial health – you could be better served building up a savings base through these with your additional money rather than putting every dollar into the mortgage.

Finally, there are several common scenarios where you can receive tax breaks for paying mortgage interest. If you’ve paid the mortgage off already, however, these won’t apply.

Money “Trapped” in Your Home

Another factor to consider is the state of real estate as an asset – while it’s worth plenty in most cases, it’s not actually a liquid form of money. This means that if you’re short on cash because you’ve put all of it into paying down your mortgage, you could struggle in a few important areas. Even if you’re making some headway into paying down a mortgage early, we recommend keeping emergency funds available as well.

When Paying Early Makes Sense

Here are a few good situations where you can benefit from paying down a mortgage earlier than planned:

  • You have an emergency fund aside for any such expenses, plus money saved for home maintenance and future planning.
  • You have no other debts with higher interest rates.
  • You have no additional investment opportunities that could yield a better return.
  • You’re nearing retirement age and may be living on a fixed income soon, but are contributing to your retirement accounts.
  • You have money saved for insurance and taxes, which will remain even after you’ve paid off a mortgage in full.

For more on whether it’s prudent to pay your mortgage down early, or to learn about any of our home loan services, speak to the staff at Altius Mortgage today.