If you are a recent first-time homeowner and, as such, a first-time mortgage owner, you’re probably basking in the glow of finally having your act together enough to have accomplished home ownership. Congratulations! It required discipline and everyone knows it, especially you.
Or maybe you’re a veteran LEO with your long-term care options safely squared away thanks to an affordable NPFBA plan. You’ve probably got 20 years of mortgage payments under your belt. You’re no stranger to discipline either.
Regardless of whether you’re just starting a career in law enforcement or not, you know that home ownership is fantastic. But paying off a mortgage early? Priceless. After all, the sooner you pay off your mortgage, the sooner you, and not the bank, own your home.
Paying down a mortgage and paying it off early isn’t rocket science, but it does take discipline and planning. So without further ado, here are five ways to pay off your mortgage early.
1. Make extra payments:
If you make at least one or two additional payments per year, you will reduce the interest paid over the length of the loan. This doesn’t mean you must write a check for double the amount of your monthly mortgage. Instead, add an extra 50% to your monthly mortgage checks every other month. In a year, you’ve made three extra payments. In four years, you’ve reduced the length of your mortgage by an entire year.
You will pay off your mortgage earlier if you lower your interest rate or shorten the length of your loan term. A lower interest rate translates into less money over time. Re-fi specials come along now and then for specific periods, so get on the mailing list of your favorite bank, credit union, or mortgage loan company.
3. Bi-weekly payments:
Do you get paid every two weeks and feel flush twice a month? Consider paying half your mortgage bi-weekly. Here’s why: There are 52 weeks in a year. So if you make a payment every two weeks, that’s 26 per year, which means 13 full mortgage payments a year instead of 12. See how that works?
4. Make one lump sum payment:
When life tosses you some lemonade you didn’t have to squeeze lemons for, think about making a one-time payment. Events like inheritances, an unexpected bonus or tax refund, etc., can provide a chunk of money that will reduce your principal balance, resulting in less interest paid over the life of your loan.
5. Pick and roll:
Yes, it’s more than just an offensive strategy in basketball. When it comes to mortgages, “pick” a handful of months out of the year to employ drastic savings measures: No restaurants, no pricey cuts of meat, no movies, etc. Add up what you usually spend on those things, and then “roll” it into your mortgage payment that month. Evaluate your monthly expenses and see where you can make cuts. This takes planning, to be sure. In January (an excellent month to cut back), identify the months in the coming year that might be easier than others to cut back. Put it on the calendar. Don’t look back.
You don’t have to be a math major to understand that paying off your mortgage early makes sense financially and will feel good as you get closer to retirement, whether you’re just starting out in your career or have retirement in the cross-hairs. Add to this scenario the financial safety and security you gain by having a long-term care plan from NPFBA, and your golden years will be so bright you’ll have to wear shades.