For many Americans, their monthly mortgage payment is the bill that eats up most of their income. It's also the bill that most people would love to get rid of. If you have a mortgage with a payment term lasting for three decades, or even longer, it can seem as if you'll be paying on your mortgage for the rest of your life.
Fortunately, there are several ways to shorten the amount of time it takes you to pay off your loan. If you're looking to start a debt-free life, try these suggestions.
Improve your credit score.
Having a great credit score can help in several ways. The best way to improve your score is to make sure you pay all your bills on time while working toward paying off as many smaller loans (think credit cards) as you can. As you pay off each loan, use the money you were using to make the payment to pay down the principal on your home loan each month.
As soon as your credit score is high enough, look into the possibility of refinancing your mortgage. A better credit score can usually give you a better rate at the bank.
Monetize your property.
Use the property that you have a home loan on to actually make money. If the home is located in a desirable area, consider renting out a room to tourists or taking on a roommate.
No spare space? Consider using the backyard to start a vegetable or herb garden, and sell the produce at the local farmer's market. Not only could you earn extra money to pay down the mortgage, but using a part of the home exclusively for a business opens the door to take several tax breaks that can save hundreds of dollars a year.
It may even be possible to do a portion of the job you already have from home, allowing you to save money on transportation and deduct home office expenses from your tax bill.
Refinance into a loan with a shorter term.
As a general rule, shorter loan terms come with lower interest rates. Essentially, many lenders believe that loans that are paid off faster are less risky than those that stretch out over several decades.
If you haven't refinanced a mortgage through a home affordable modification program in several years, check to see if you qualify for a lower interest rate simply by refinancing into a mortgage that only knocks one or two years off of your loan term. Odds are you won't see an increase in your payment, but you'll cut down on the amount of time it takes to get the mortgage paid off.
Similarly, you may want to consider agreeing to a slightly higher payment if it takes a significant amount of time off of your loan.
Find a new mortgage with a lower interest rate.
Home loan rates are at historically low levels, which means many people will be pleasantly surprised when they shop for a new mortgage via a home affordability mortgage program. Even a small decrease in the interest rate can translate to thousands of dollars in savings over the life of a loan.
Find a mortgage with lower fees.
If you're currently paying PMI or finance fees, look for a mortgage that doesn't have these fees. Often these fees are dropped after there is sufficient equity in a property, so even if you have been turned down for better loans the past, be sure to reapply every few months to see if your situation now looks more favorable to a bank.
Be sure to take the time to look into a home affordable modification program.
Review insurance and taxes.
Home insurance and property taxes are usually paid into an escrow account each month and can be a large part of the monthly bill. Talk to an insurance agent about ways to reduce your home insurance bill.
Sometimes, simple upgrades can save a lot of money. While you're at it, check with your local property assessment office to see if there is any way to lower your property taxes. While you're exploring this possibility, ask about a home modification program that can help to lower some of these costs.
Conduct an energy audit.
After your mortgage, your electricity bill is probably your next highest bill. Fortunately, most power companies offer free or low-cost energy audits to help you determine ways to lower your electric bill.
Use the money you save to pay off your mortgage faster. It may even be possible to complete some home repairs that increase the value of your home, allowing you to increase the equity in the property without actually paying more toward your mortgage.
It's important to note that all of the suggestions on this list can be used together to help you reach your goal of paying off your mortgage faster. Consider using some of the ideas to save money while you research your options when it comes to refinancing your home.