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· Switch to Bi-Monthly Payments. By making this one simple change, you can shave off as much as 5 years from a traditional 30-year mortgage. Paying bi-monthly has two key advantages: (1) You have more going to principal sooner which means less time for interest to accumulate, and (2) you will end up making an extra payment every year which will also help you save on interest and pay your loan off even faster. It’s worth noting that not all mortgage servicers allow for bi-monthly payments. This may be another reason to look into our next option… · Mortgage Refinance. In many cases, refinancing will add more time to your mortgage by lowering your monthly payment and extending your term, but it doesn’t have to work that way. When you refinance, you also have the option of switching from a traditional 30-year mortgage down to a 15 or even a 10-year mortgage. Your monthly payment will be a little higher, but not proportionally to the number of years you’ll be removing from your term. Before you commit, remember to ask if your new mortgage servicer allows for bi-monthly payments. · Mortgage Recast. Many people are familiar with refinancing, but not as many people know about recasting. This is when a borrower pays a large sum of money towards their principal and a new mortgage is then recalculated based on the remaining balance. This is most likely to happen whenever someone receives an inheritance or some other influx of cash. Not all mortgages allow for a recast, but if you have a relatively large amount of money set aside then it may be worthwhile to see if you qualify. · HELOC. A home equity line of credit (HELOC) is another option for paying off your first mortgage. Think of it like a credit card with a much lower interest rate because it’s secured by the value of your home. A HELOC is typically open for a 10-year period in which you can borrow from and repay it as often as you like. The most common reasons people open a HELOC are to help pay for home improvements, pay off higher interest debt, or help pay for a child’s college education. However, it is possible to use the available funds from a HELOC to pay off the first mortgage entirely. You could end up saving thousands of dollars because of the amount of accumulated interest you could avoid. There are even potential tax benefits if you use funds from a HELOC to help with any home improvements. · Rent It Out. Your home is an asset, so put it to work! There are a couple of different directions you could go. If you have a spare room, a mother-in-law suite, or even a nicely finished basement then you can quickly start renting it out on sites like Airbnb, HomeAway, or VRBO. Some homeowners may rent out their extra space on a regular basis while others may decide to rent out their entire home whenever they’re away. The other option is to simply find a long-term tenant to lease your home to and find another more affordable housing option for yourself. Becoming a landlord isn’t for everyone, but many people have discovered that turning their former home into an investment property provided them with the financial freedom they were looking for.
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