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# Pay Off Your Mortgage Faster

Wondering how to pay off a mortgage faster? Paying down a mortgage quickly can leave you free to establish other investments, in addition to helping you establish financial freedom. There are two major ways that you can pay off a mortgage faster: by making additional payments towards it or refinancing it to more favorable terms.

## How to Pay Off Mortgage Faster through Refinance

Refinancing a mortgage lets you pay off your initial mortgage with another mortgage loan. This leads to paying down the mortgage faster by:

Pay off the house faster by refinancing with a lower interest rate. Your interest rate has a substantial impact on how much you pay every month. If you refinance at a lower interest rate, you may be able to increase your principle payments without increasing the overall housing expense.

Pay off the house faster by refinancing for a shorter period. Often, refinancing for a shorter period will naturally reduce the amount of interest you’re required to pay. If you refinance a loan with 18 years left on it, you may be able to refinance it as a 15-year loan at a lower interest rate and consequently lower monthly payments. You can also refinance a loan in a shorter-term period to ensure that you pay it off quickly.

If you don’t have a good credit rating, you can refinance with a co-signer to pay off the home loan early. Refinancing with a co-signer will also make them responsible for your mortgage loan, but it won’t necessarily mean that they have possession of your home or your deed. If they have better credit and a solid financial history, refinancing with a co-signer could mean that you pay substantially less interest.

On the other hand, paying off a mortgage faster can ease a psychological burden. Once your mortgage is fully paid off, you can begin saving for other things or begin investing in other areas of your life. This can be a disciplined way to “save” money, especially for those who otherwise find it difficult to save money.

## Debt and Financial Discipline

Paying off a mortgage faster may also be necessary for those who are trying to lower their debt ratios. If you are trying to procure a different type of loan or trying to purchase additional property, paying off your initial mortgage loan will lead to significantly less debt showing up on your credit report. This allows you to procure additional debt, which can be leveraged for other transactions.

Paying extra off your mortgage often comes down to financial discipline and pushing money from other areas in your budget towards your home. The faster a home mortgage is paid off, the faster you can focus on other investments.

## Deciding Whether to Pay Off Mortgage Faster

It isn’t always the best idea to pay off a mortgage faster. There are other things that need to be considered when paying down mortgage loans. From a purely financial perspective, paying off a 3% mortgage loan may not be worthwhile if you have investments that are making 6%. It comes down to a 3% net to put money into the investments rather than the mortgage loan. Mortgage loans are “good debt,” so they don’t harm your credit rating or your appearance to lenders. In fact, if you pay off the home loan early, you may see your credit score temporarily decrease.

Many individuals also have other debts that should be prioritized. A 12% credit card is almost universally better to pay off than a 3% mortgage loan. Emergency savings accounts are equally important, as a lack of liquidity can lead to someone having to spend more money during an emergency or having to procure additional debt.

## Making Additional Payments on Your Mortgage

When you make additional payments on your mortgage, the additional amounts are applied directly to your principle. Over time, this has an extremely profound impact. Paying off more of your mortgage early on will mean that less interest will accrue throughout the life of the loan. Consequently, paying off an extra $50 early in the mortgage loan can save you hundreds of dollars later in the loan, forcing you to pay down the mortgage faster.

When it comes to paying down mortgage loans through additional payments, it’s usually a matter of how to make those additional payments. Homeowners have a few different options:

- Pay off the house faster by paying a little more each time. If your mortgage payment is $950 a month, you can pay $1,000 a month each time. The additional $50 will be put towards the principle. Early in the mortgage, each $50 paid can save you up to $30 to $40 during the lifetime of the loan.
- Pay down mortgage faster by paying a large lump sum. If you get a cash settlement, a life insurance settlement, or another large windfall, you may want to consider putting it towards your mortgage. This will ultimately save you money, which can be more than the amount of money that you would otherwise gain through investments. On a smaller scale, you can also send bonuses and overtime checks to your mortgage.
- Pay off the mortgage sooner by paying half your payment every two weeks. Instead of paying your mortgage every month, you can pay every two weeks. By paying half your mortgage every two weeks, you will be making an extra payment each year. This extra payment will lead to you paying off your mortgage much faster, even though you’ll still be paying roughly the same amount every month.

All of these are simple tricks to make it easier to pay off your mortgage faster. Ultimately, you’re going to need to spend more now to save you money later — unless you refinance your mortgage loan completely. If you want to know how to pay off a mortgage faster without paying more, refinancing is a special scenario.

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