How to pay off a $200,000 mortgage faster
While the average mortgage in the U.S. is around $200,000 you don't have to spend 30 years or more paying off your home. Check out these real tips to help you pay off your mortgage early. (iStock)
Thirty years is a long time, but it's the most common repayment term for mortgages in the U.S. According to Experian, the average mortgage debt among Americans is $215,655. While this is a huge chunk of money to have hanging over your head, there are several solutions to consider if you’re looking to pay down your mortgage balance quickly.
The fastest ways to pay off a $200,000 home loan include doing things like mortgage refinances, making extra payments, switching to a bi-weekly payment schedule instead of monthly, or selecting a flexible loan term. Let’s look into each of these options more closely:
- Refinancing your mortgage
- Change your mortgage payment schedule
- Pay down other debt
- House hack
- Use your tax refund and windfalls
If paying down your mortgage faster sounds interesting, you can visit a marketplace like Credible to check out refinance rates and compare mortgage companies.
How can I accelerate my mortgage payoff?
1. Refinancing your mortgage
Refinancing your mortgage can help you take advantage of today’s low refinance rates and possibly pay your home off earlier. You can potentially save thousands of dollars over the life of your loan with a lower interest rate and a shorter loan term.
When refinancing your mortgage, also consider changing the type of loan you have to help reach your financial goals. For example, a 5/1 adjustable-rate mortgage could be an option that would provide you with a shorter-term at a much lower interest rate. A 5/1 ARM usually offers a fixed interest rate for five years. After that, the interest rate adjusts once per year.
Visit Credible to view refinance loan options across multiple mortgage lenders and get pre-approved for a mortgage refinance in just minutes.
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2. Change your mortgage payment schedule
You don’t have to just make monthly payments on your mortgage. In fact, you can shave several years off the life of your loan by switching to bi-weekly payments. Just split your mortgage payment in half and pay that amount every two weeks.
Some months are longer than others, so you may end up making three payments in a month if you get paid bi-weekly. By the end of the year, you’ll have made the equivalent of 13 monthly payments.
You can also try paying extra toward the principal balance. Budgeting an additional $200 or $500 on your monthly payments, for example, can help make a huge dent in your mortgage balance.
If you want to refinance your mortgage before switching from monthly payments, Credible allows you to see quotes from different mortgage companies without pulling your credit, so you can shop around and do your due diligence first before committing to anything.
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3. Pay down other debt
If you want to pay off a $200,000 mortgage quickly, try to get rid of your other debt first. Whether you have credit card debt, personal loans, a car loan or student loans, start paying down all non-mortgage debt and this will free up a lot of your income.
If your (non-mortgage) minimum debt payments add up to $600 for example, paying off your debt will free up $600 per month or $7,200 per year. Plus, you’ll be adding money back into your budget for other needs and financial goals while you’re focusing on paying off your mortgage.
Consider taking out a debt consolidation loan if you have multiple high-interest credit card debts. You can use Credible's payment calculator and compare personal loan lenders and rates.
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4. House hack
House hacking is where you rent out a portion of your home and use the income to pay down your mortgage or supplement your bills. If you have a basement, spare room, or extra space you could rent out, you could be making cash to help you pay off your mortgage faster.
If you’re not interested in renting out your spare space to other people, you may want to rent out your garage or shed as storage space to someone else and earn extra money that way.
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5. Use your tax refund and windfalls
Windfalls are typically extra money that you didn’t really expect. If you stick to your budget and live on the income you earn, you can put any windfalls like a tax refund or bonuses toward paying off your mortgage. Even if the windfall just rounds up your mortgage payment to the next hundred dollars, putting extra money toward the principal balance will help you shave years off your mortgage repayment.
SHOULD I PAY OFF MY MORTGAGE EARLY?
Paying off your mortgage early is possible
Many people have paid off their home loan early, and you can do it, too. You just need a clear financial strategy that works for you. One of the easiest ways to get started is by seeing if you can refinance your mortgage to a lower interest rate. Doing a mortgage refinance can put you in a position of saving money while and paying off your mortgage faster.
Be sure to visit Credible to compare rates and mortgage lenders and to also get in touch with an experienced loan officer who can answer your mortgage questions.