A home loan is the largest loan that most of us will ever take out. A home purchase represents the biggest purchase that a person can make. Most home loans are either 30 or 15 years. But the average is about 30 years on a fixed rate. After a few years have gone by, it makes sense to wonder how you can pay off your loan faster. These tips can help you get ahead.
Refinance to Shorter Term With Lower Rates
The first option is that you will want to consider refinancing your home loan to a lower rate at a shorter term. By reducing the rate, you can reduce your monthly payments. This makes getting a shorter term a more realistic possibility because you can afford the difference thanks to the lower interest rate. If you have enough equity in your home, many banks will compete to earn your business and may offer a lower rate that better fits your budget and financial outlook.
Double Your Monthly Payment
The best way to pay off your home loan quickly is via doubling your monthly payment, explains Bank Rate. If you do some hammering on your budget, you might be able to figure out a way to get the necessary funds to make double payments. If you share a home with your spouse and you both have incomes, this is made even easier. Make sure you apply the second monthly payment to your principal.
Make Biweekly Payments
Yet another lesser known trick involves making weekly or biweekly payments. That's because you can actually reduce the interest that is being charged by a small amount, thus decreasing the time that it takes you to pay off your loan with lessened interest charges.
If you are able to consolidate your other bills into one monthly payment, like through an equity line of credit, you can more easily make double payments. Now you'd be getting rid of your high interest debt and paying off your home loan twice as quickly. And that's financial food for thought.