Are you here because you have a mortgage on your home or property and are looking for ways to get out of the debt distress at the earliest? While your loan against property would have been a thought-through decision which was the need of the hour, regular monthly repayments and better financial stability now may want you to pay off the mortgage without stretching it for too long. We understand, no one wants their mortgage to be a lifelong hurdle.
So, here were present three strategies for you to consider paying off your mortgage quickly.
3 Strategies to Pay Off Your Mortgage
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Pay Off More Amount in Monthly
Most of your monthly instalments go towards the mortgage interest. If you choose to pay more amounts on your instalments, it would contribute towards paying extra on the principal too. The more principal is paid off, the lesser the interest payments would be. Check with your financial institution regarding the options to make extra payments towards the principal amount. Some financial institutions might charge a prepayment penalty for doing so while some may accept extra payments only on certain terms and conditions. Whatever be the case, make sure the extra money goes towards the principal and not towards the payment for the upcoming month.
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Divide Your Payments
Consider bi-weekly payments for your mortgage. If you opt for monthly instalments, you will be making 12 payments in a year. However, if you consider biweekly payments, with each instalment amount being half that of your monthly payment, you will make 26 payments in a year—because a year has 52 weeks—which makes it 13 full payments in a year. The one extra payment each year can make a big difference in due course. By accelerating the mortgage payments this way, you get to make extra payments to the balance of the principal amount. This enables you to pay off your mortgage faster. The earlier you pay off the principal amount, the more savings you can make on the interest payments.
ALSO READ: Sure Ways to Reduce the Burden of Your Mortgage Loan Balance Transfer
If you are facing difficulty in paying your
mortgage loan EMI, you can consider low-interest mortgage loans. For this, you just need to find a lender who offers this type of loan and request a balance transfer. This way you benefit from low-interest rates and affordable EMIs while paying off your mortgage debt more quickly. However, do remember to check the terms and conditions of the new lender before availing of a low-interest mortgage loan.
Mortgage Refinance
Taking a loan against a property with around a 20-year repayment period can look like a herculean task once you start
paying your EMIs. In such a situation, request your lender for a mortgage refinance. The term "refinancing" refers to a modification in the loan's terms and conditions such as the EMI,
mortgage loan interest rate, and loan length. It allows you to save a lot of money on interest while also helping you to pay off your debt quickly. However, while applying for a mortgage refinance, you must keep in mind that shorter tenure results in higher monthly payments.
Round-up Your Payment
If you are searching for ways on how to pay off your mortgage quickly, rounding up is the best way to go. Rounding up your monthly payment takes a little extra effort but it can have a big effect on your repayment schedule. Rounding up is one of the best strategies to pay off your mortgage faster. Let's look at an example to understand it better:
If your monthly mortgage
loan against property obligation is around Rs 9,300, you can save a lot of money at the end of your loan term by rounding up your payment to Rs 10,000. By doing so, you will not only save a large amount on interest payments but you will also be able to pay off your mortgage loan faster.
Rent Out Space
If you have a mortgage debt secured by a home that is currently unoccupied, then renting out that space can get you some extra income that can be used to pay off your mortgage loan and help you in closing a home loan early.
ALSO READ: Common Queries that Revolve Around Loan Against Property Misconceptions
Why Would You Want to Pay Off Your Mortgage Early?
- To Save More on Interest Payments
By paying a lump sum amount towards the mortgage principal, you reduce the years of interest payments, thereby, reducing the overall interest on your loan. Since interest is paid on the overall balance left, this could save you a lot of money that would otherwise be spent on interest payments.
- To Reduce Financial Strain
By paying off your mortgage early or by even paying a lump sum amount towards the remaining principal amount, you can lower your monthly payments and the number of instalments left to pay. This can free up some cash that can further be used to pay off your loan. Therefore, it leads to less financial strain and better savings for the future.
To Expand Your Credit
By paying off your debts early,
you can improve your credit score. This increases your future borrowing capacity, qualifying you for a higher amount from financial institutions. In the long run, you can invest in another property and eventually earn appreciation for both.
ALSO READ: Top Mistakes to Avoid While Taking A Loan Against Property Mortgage can seem like an uphill battle if you have years left to pay it off. It can affect your kids’ education, your retirement plans, your dream vacation plan, or even your health. Hence, the reason to pay off a loan quickly can vary from person to person. While making mortgage loan repayments, do not just stick to the minimum payment that you need to make. Make prudent use of any extra income that you can afford and other strategies mentioned above and be debt-free earlier than expected.
Disclaimer: This post was first published on 7 June 2019 and has been updated for the latest information, freshness, and accuracy.
