5 Tips on Paying Back Your Home Loan Faster!

Paying off your mortgage can seem like a daunting task when you look at those monthly statements that show your remaining balance. However, no matter how much money you still owe on your mortgage, you can start taking steps now to pay it off faster. By implementing even one of these strategies, you could easily shave months or years from the life of your mortgage. Imagine how much time you could save yourself by implementing more than one strategy! Here are five tips to start paying back your home loan faster.

1. Put More Money Toward the Balance Each Month

This is a fairly simple strategy, though it’s one that many people overlook. Adding a simple bit of extra money to your monthly mortgage payment can have significant effects over the life of the loan. Many families fall into the trap of planning to put more money toward the mortgage without ever actually doing so. It’s important to commit to this extra money you’ll be paying each month. Choose an amount of extra money that you can reasonably commit to paying each month on top of your normal payment. Then, get yourself into the habit of thinking of this increased amount as your actual payment. This can help you stay on track.

2. Pay Every Two Weeks Instead of Once Per Month

Though many financial experts debate about the difference between making payments monthly or bi-weekly, you can actually pay back your home loan faster by making a payment every two weeks. It’s important to take some extra figuring into account before adopting this strategy, because you’ll end up making more payments each year. Because the calendar will fall so that some months will have three pay periods, you can train yourself to make additional payments with this simple planning technique. This strategy works especially well for people who get paid bi-weekly anyway. You can simply arrange to have your mortgage payment automatically deducted, or account that it will come out of each check.

3. Look for Lower Rates and Better Deals with Other Loans or Credit Cards

Another great way to begin paying your mortgage back faster is to look for loans and credit cards with incentive programs. Though you may already have a loan with a low interest rate or a card with a great rewards program, keep shopping around to see if you can find any better deals. Many people effectively use their credit cards to earn cash-back rewards or discounts for services they would be using anyway. The key with this strategy is to be sure that you’re only charging what you already have the money for. When you pay off the balance in full each month and gain rewards, you can put savings toward your mortgage.

4. Scale Back Your Monthly Expenses

Though many people cringe at the idea of cutting out their favorite cable TV shows or their beloved lattes, it’s important to think about where your money is going. When you want to pay back your home loan faster, minimizing unnecessary expenses can help you come up with additional cash every month. Though you don’t need to sacrifice all of your entertainment expenses, you should work to develop a conscious budget that keeps your long-term goals in mind. For example, purchasing a used car over a brand new vehicle can generate huge savings. This small sacrifice can help you make significant steps toward conquering your home loan repayment plans.

5. Use Extra Lump Sums of Money for Your Mortgage

Finally, training yourself to put additional sums of money toward your mortgage payment can help you to pay it off much more quickly. Some families automatically put the money from their tax returns toward their home loan payment, while other families use annual bonuses and salary increases to generate extra cash. This strategy falls in line with a commitment to spend consciously and to evaluate your purchases. When you run into extra money that you don’t need to make your budget, simply put it toward your mortgage payment instead. This allows you to pay off your loan without having to sacrifice any of your regular expenses, offering you a way to meet all goals.

Which of these methods do you think are most effective? Or, what has worked for you?

This guest post was written by Tom who writes at MoneyChoices.com.au, an Australian personal finance website offering home loan comparison. Check out their blog for more of his writing.

Photo by David Antis