6 Ways To Quickly Pay Down Your Mortgage

Taking out a loan in your 20's or 30's and paying it off in your 50's or 60's can seem stressful and you get a nauseating feeling in your stomach when looking at your mortgage statement and seeing those dreaded lines: "360 payments" and "Payoff Date: 2044." But there is hope, and you don't have to be stuck with a 30-year schedule.

Here are six ways you can speed up your repayment clock:

1. Refinance into a 15-year or 20-year loan

Although a 30-year mortgage is what most people consider, most financial companies offer you the option of taking out a 15- or 20-year loan instead. These loans are paid off faster,and applied to principal reduction, rather than interest. With a 15-year loan you will face a larger payment but contrary to what others say, it is not double of a 30 year loan. Each month, you will divert a larger sum of your payment toward your principal and interest payments. The total interest paid over the life of the loan will drop since you will reduce principal faster, and 15- and 20-year loans are usually at a lower interest rate.

2. Make payments as if you've refinanced

Should you refinance or simply make extra payments toward your original loan? Refinancing from a 30 into a 15-year loan does have it's drawbacks. First, you lose out on flexibility. If an emergency arises you might not be able to pay the higher payments. Second, you will have to pay another round of closing costs, which adds up to a few thousand dollars. Which could take you a lot longer to reach the break-even point. If you are close to the end of your mortgage term it might not be wise to refinance, If you are concerned about the two drawbacks of refinancing, just make enough extra payments to pay off the rest of the loan instead.

3. Refinance into a 30-year with a lower interest rate:

If you took your mortgage out before the recession, when interest rates were around 5–6%, now would be a good time to reduce that rate. If you have good strong credit and a low debt-to-income ratio, check into about refinancing into a 30-year loan at a lower interest rate. Once you refinance, your monthly payments will go down instead of going up. This will save you interest over the life of your loan, but it will not speed up your payoff date... it will actually make it longer.

4. Find cheaper homeowner's insurance

The lower your homeowner's insurance premiums is, the less you will pay each month. Be smart look around at other insurance companies and ask about bundle pricing and take advantage of a lower rate. Request a higher deductible. If you are able to lower your homeowner's insurance premium, your monthly mortgage payment will drop. Keep making the same payment, so that you can put the difference toward speeding up your payoff date.

5. Make biweekly payments:

Instead a one lump sum mortgage payment each month, make a biweekly payment instead. How will this help speed up the process? Well, since there are 26 biweekly pay periods each year, you will actually make one extra month's payment every year without knowing or feeling it.

6. Downsize or monetize:

You can always downsize into a cheaper home if you want to be free of your mortgage. Sell your home and use that equity to make a large payment on a new more efficient home. Or you can monetize your existing home. Add an apartment to your home to gain rent. You can use this rental income to pay down the mortgage. Yes, you might face challenges with renters but a fully paid off mortgage might just be worth it.

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