Purchasing a home is an exciting part of life. But, home ownership means taking on a lot of debt.
About 80% of home buyers choose a 30-year fixed rate loan. While 15-year loans are available, expanding the term of the loan means smaller monthly payments.
But, what most people don’t realize is that the longer the loan, the more interest you pay.
If you purchase a home for $250,000 with a 4.5 interest rate, you’ll pay more than $206,000 towards interest. As a homeowner, you want to pay your mortgage off as quickly as possible.
Looking for tips on how to pay off a mortgage in 10 years? If so, you’ve come to the right place!
Continue reading for tips to paying off your mortgage quickly.
1. Purchase Wisely
The first step to paying off your mortgage early is to make a wise purchase.
Buying a home shouldn’t put you in a financial bind. Your mortgage should take up no more than 28% of your total monthly take home.
Set yourself up for success by buying a home that fits into your budget. Otherwise, the chances of paying off your mortgage early are slim.
2. Pay More Than the Minimum Monthly Payment
Your monthly payment is determined by the total loan amount as well as the interest rate. Other costs can also be wrapped into the mortgage including:
- Closing costs
- Private mortgage insurance
- Homeowners insurance
- Property taxes
When making your payment, be sure to put extra money towards the principal amount. This money will go towards the loan without any going towards interest or escrow.
The extra principal amount will depend on the total value of the loan.
If you purchase a home at $200,000, you’ll want to put at least an extra $1,000 towards principal.
3. Pay Down Smaller Debts
If you’re wondering how to pay off a mortgage in 10 years, start focusing on other debt.
Chances are you pay other loans each month. If you have a car loan or credit card debt, pay them off quickly.
By paying off other loans, you’ll have more money to put towards your mortgage.
4. Cut Costs
To pay off your mortgage early, you’ll need to cut costs where possible.
Take a look at your spending habits. What services can you do without for a little while?
Where can you spend less or not at all?
The average American spends more than $1,200 on cable each year. But this is just one way to save money. You can also:
- Avoid eating out and cook all meals at home
- Reduce cell phone bill
- Spend less on clothing and shoes
- Eliminate consumable habits like drinking and smoking
By cutting costs, the money you save can be put towards your principal mortgage balance.
How to Pay Off a Mortgage in 10 Years: Wrap Up
Paying off your mortgage early seems like a daunting task. But, with a little financial planning, you can achieve your goal.
The key is to set a budget, create a plan, and stick to it!
If you have any questions about mortgage loans or home buying, you’ll want to talk to a professional.
At Benchmark Mortgage, we have the expertise needed to guide you in the right direction. Contact our team today.