We all desire to reach the state of financial freedom. And if it comes faster, that’s even better. When you are buying a house, of the major concerns for many is a mortgage.
It may be challenging to find the optimal mortgage for your needs but having debt is not a thing that many of us look forward to. But since it is a huge financial decision that you will make in your lifetime, it is essential to familiarize yourself with all the options.
What are some of the ways, in which you can pay off your mortgage faster?
• Make a lump sum payment
Depending on your mortgage contract with your lender, you can make a lump sum payment towards your mortgage. This amount is applied to the outstanding principal. It is so when you don’t owe any outstanding interest.
Also, it is a limited amount, according to the terms of the contract. If you put more money than the acceptable amount, you will be liable to prepayment penalties. If the mortgage contract is open, at renewal, you may be able to pay as much as you can, at that time.
• Increase your regular payments
Even a small increase may help you in paying off the mortgage amount faster. Usually, if you increase the remittances, you may not be able to lower then, during the term of the contract. It is the period in which the deal is in effect.
To avoid prepayment penalty, you can only increase your payments by a certain amount. It should be as agreed in the contract.
• Increasing the frequency of payments
It is also known as the accelerated option. Here, you opt to make payments on a weekly or biweekly basis. In the long run, it saves you on interest charges. It also helps you pay the principal faster.
You may be able to make an extra monthly payment, in a year, with the accelerated option.
• Same Payments even with reduced rates
As you renew and negotiate a new interest rate for your mortgage, you may get a lower rate. If you keep paying the same amount towards your mortgage, and with lower interest rates, you will be able to pay your mortgage faster.
So, yes, you can achieve financial freedom and final call it home, with the above mortgage repayment options.
