Could You Pay Off Your Mortgage Early?

If you’ve been able to afford your dream house, then you should consider it a blessing to even have the mortgage you have, especially with how the prices continue to rise for those who have to get on the market. However, if you’re looking to get out of your mortgage early, there are options for that. Here, we’re going to look at a few of them.

 

Start paying extra

It’s a simple strategy but if you’re not able to pay more on a more formal basis and routine, then you could simply look at making extra principal payments when you have the opportunity. Consider making use of the budgeting apps that can help you put a little extra aside every now and then, shaving down the total owed and reducing your interest at the same time.

 

Refinance the home

If you would rather have the benefits of a formal deal that allows you to structure out exactly how you’re going to pay your loan off early, there are ways to do that, too. Making the choice to refinance your home can open up the opportunity for a shorter repayment period. Granted, this can mean that you’re paying more each month, but it would also mean that you have less interest to pay.

 

What about recasting?

Refinancing your mortgage isn’t the only option. You can also recast it, which means that you keep your existing loan, but you pay a lump sum and ask the bank to adjust the payoff schedule as a result. Not all companies allow you to recast your mortgage, however, so you might not be able to do it with your current provider. The fees for recasting are low, however, if you can do it. The only thing that they often don’t affect the interest of your payments.

 

Use lump sums when you can

Learning how to make good use of lump sums when they come your way is an important part of good financial sense. You might, at first, consider it “bonus money” to be spent on the things that you want but if you consider it closely, you can easily see how it could help you get much closer to goals such as paying off your mortgage. You can reduce your overall loan with lump-sum payments, which can, in turn, make it easier to refinance later, too.

 

Any risks to paying early?

There are serious benefits to paying a mortgage early. If you can get it formally refinanced or recasted, there are no risks at all, only the costs of having the loan restructured. Otherwise, if you’re paying it off a little less formally, you could miss some of the benefits to your credit score by living up to the terms of your loan.

 

Paying off your mortgage early can help you free up your finances for future investments or can help you if you’re planning to make a move sometime in the future. You have options, but it’s up to you to determine which work best for you.