Money Advice

Tricks for paying off your mortgage early

Posted by The Simply Money Advisors Team on May 30, 2018 2:59:20 PM

Wouldn’t it be nice to not have to worry about your mortgage payment? Wouldn’t it free up a lot of extra cash for other expenses?

Here are a few ways you can benefit from paying off your mortgage early:

  • Reduce your expenses: Your mortgage is a large monthly expense. Taking it out of the equation will substantially lower your expenses heading into retirement. 
  • You’ll save money on interest: When paying off your mortgage early, you’ll pay less in interest.
  • Allows you to invest elsewhere: With the extra cash you’re freeing up once it’s paid off, you now have funds to contribute to your retirement accounts, such as your IRA accounts or 401(k) account.
  • Gives you peace of mind: It will also eliminate stress and worry about potential dips in your income over retirement.

So, how do you achieve this goal before retirement? Here are a few options:

Increase your monthly payment 

Each month, pay a little extra toward your mortgage principle. This will help you save on interest payments down the line.

Look at your budget and determine areas where you may be able to shift more money to your principle. Restructuring your budget will not only help you find extra cash to put toward your mortgage, but it can help save you some money. 

If you go this route, be sure to specifically tell your lender that the extra money is for “principle only.”

Switch to bi-weekly payments

This basically means you would pay half of your mortgage every other week. Doing it this way means you’d be making 13 full-sized payments within a year instead of the normal 12… yet you wouldn't have to make a huge financial sacrifice to make the extra full payment.

Refinance your mortgage to a shorter term

Depending on your interest rate, this may lower the amount you’ll pay in interest over the term of your loan. Keep in mind that shortening your loan term may increase your payment. Make sure you can afford the new payment before moving forward. 

If refinancing seems like a financial burden, this may not be the best option.

Put ‘found money’ towards your mortgage

Just receive a bonus at work? Have extra cash from your tax refund? No matter where the extra money comes from, try to put all additional funds toward your mortgage principle.

The Simply Money Point 

If you decide to move forward and pay your mortgage off early, always be sure to check with your lender to see if there are early payment penalties.

And while we at Simply Money Advisors generally advise paying off your mortgage before retirement, you need to make sure that strategy makes sense for your particular situation. You don’t want to be pumping all your money towards your house at the sacrificing of saving. Work with a trusted financial planner (we recommend a CERTIFIED FINANCIAL PLANNER™ or Chartered Financial Consultant®) to help you develop a personalized financial plan to meet your financial goals and objectives.

Need help planning for retirement? We’ve just launched “Retirement Resources,” a brand new educational section of our website! You’ll find free downloadable guides, online tutorials, and live events – all designed to educate you on retirement planning, how to select a financial advisor, Social Security, and more. 

Take me to Retirement Resources

Topics: Financial Planning

Disclaimer

Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Simply Money Advisors), or any non-investment related content, made reference to directly or indirectly will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, this content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained here serves as the receipt of, or as a substitute for, personalized investment advice from Simply Money Advisors. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Simply Money Advisors is neither a law firm, a certified public accounting firm, nor a tax advisory firm and no portion of the blog content should be construed as legal, accounting, or tax advice. Please consult your own attorney, accountant, and tax advisor for legal, accounting, and tax advice. A copy of the Simply Money Advisors’ current written disclosure statement discussing our advisory services and fees is available for review upon request. Advisory services offered through Simply Money Advisors, a SEC registered investment adviser. Insurance services are offered through Simply Money Insurance Agency, a separate entity from Simply Money Advisors. Simply Money™ and the spiral symbol are trademarks of Simply Money IP Holdings, LLC.

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