Many people have mortgage payment terms of up to thirty years or even more, making it challenging to keep some savings, especially for retirees with a fixed income. After a few years, a lot of people are pressured by being in debt and want to reduce their payment life to live a debt-free life and also keep some savings. Below are ways you can shorten your payment period to pay your mortgage early.
Make extra payments or overpayments.
It is possible to make extra mortgage payments biweekly or monthly payments. Biweekly payments are made by cutting the monthly payment in half, and the payment is made after two weeks. At the end of the year, you will realize you have made payments for 13 months rather than 12 months. Before making extra payments, it is best to consult with your lender to be sure they accept additional payments. Making extra payments will save you a significant amount of interest.
Use a home equity line of credit.
A homeowner with enough home equity can make mortgage payments using HELOC. To be able to use HELOC, your home worth must be higher than your existing mortgage loan. By using HELOC, you can reduce the payment period and reduce the total interest cost. To have a positive outcome, you can work closely with someone who has taken a HELOC course to guide you through the process. Alternatively, you can enroll for the course yourself in institutions like Replace your University to understand using HELOC better. This is because using HELOC is risky, as you may incur higher interest rates if your timing is incorrect.
Refinance your mortgage loan.
Refinancing your mortgage loan is only possible if you shorten the loan term or reduce the interest rates. You must also be sure that the profit you make from refinancing your mortgage outweighs the costs. Refinancing your mortgage will allow you to switch to a short-term loan and reduce your interest rate. It is essential to be aware that once you change, the monthly payments will be higher and might stretch your monthly payment too thin. Otherwise, use bank rates to compare the rates of your current term and the one you want to switch to and choose the favorable one.
Get a loan modification.
Loan modifications are generally reserved for financially unstable borrowers who have financial difficulties paying off their debts. Loan modification focuses on reducing the interest rates r shortening the term. Discuss the loan modification with your lender to avoid facing credit consequences determined by how your lender reports to the credit agencies. A loan modification is a permanent solution that helps make monthly payments manageable by changing the loan interest rates and terms to make the monthly payments affordable.
Before deciding to go for a shorter payment term, ensure that your agreements do not have statements restricting you from deviating from the payment schedule. You must provide the extra payments you pay, go to the principal rather than the interest, and this will help you avoid making additional payments.