Owning a home has always been a big part of the American dream, but spending 30 years in debt for a traditional mortgage probably sounds scary. Mortgages aren’t necessarily that bad compared to other high-interest debts, like credit cards, but it’s still a debt that will weigh on your mind.
What if you could pay off your mortgage much faster, though? It’s not always as difficult as it sounds; here are some steps you can take to make that dream a reality.
Related: Different Types of Mortgages
When you want to put more money towards your mortgage, you’ll likely have to cut back on other things that to be able to afford to do so. Limiting your other monthly expenses is an amazing way to pay off your mortgage more quickly. For example, if you have multiple monthly subscription services, you can start by cutting out the ones that you use the least.
Remember, these spending cuts don’t have to be permanent -- once your mortgage is paid off, you can always go back to what you were spending money on before. Cutting back on spending is a temporary measure so that you can focus on paying off your mortgage.
The Formula to Pay Off Your Mortgage in 5 Years
On paper, paying off your mortgage in five years is pretty straightforward; all you have to do is create a payment schedule to know how much you must pay each month and find (and stick to) ways to make those payments. Ideally, you can make this happen by making larger payments or more frequent ones than your lender requires. For most people trying to pay off their mortgage quickly, this means that you will probably have to cut back on spending in other areas or find ways to increase your income each month.Set Your Target Date
The first step is setting a target date that you want to pay off your mortgage by; a five-year goal is great, but it’s easier to achieve your goal if you give yourself a hard deadline. Write down this target date and keep it somewhere that you will see it often, so you don’t forget what you’re working towards. You can also set multiple dates to help stay on track; you can make the quarterly and the halfway point to reaching your goal of paying off your mortgage. Once you set a target date, you can figure out how much you need to pay on your mortgage each month and each year. You can also get an amortization schedule from your lender, which shows how much of your payment goes towards the principal and interest.Make Larger/More Frequent Payments
If you have a mortgage already, you can try to make extra monthly payments. For example, if you get paid biweekly, you can make a payment from each paycheck. Or, you could make a lump-sum payment at the end of each year with the money you’ve saved up. Another easy way you can put more money towards your mortgage is to round up your payments. Even rounding to the nearest $10 adds up in the long term.-
Put 20% Down
Cut Back on Your Spending
When you want to put more money towards your mortgage, you’ll likely have to cut back on other things that to be able to afford to do so. Limiting your other monthly expenses is an amazing way to pay off your mortgage more quickly. For example, if you have multiple monthly subscription services, you can start by cutting out the ones that you use the least.
Remember, these spending cuts don’t have to be permanent -- once your mortgage is paid off, you can always go back to what you were spending money on before. Cutting back on spending is a temporary measure so that you can focus on paying off your mortgage.
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Stick to a Budget
Boost Your Income
If you have a hard time cutting back on spending each month, you can always look for new ways to bring in extra income each month; it’s a great time to see if one of your hobbies could help you out! If you’re crafty, you could start selling homemade gifts on Etsy, or if you have a passion for anything like programming, writing, or web development, you could always sell your services to bring in extra money to put towards your mortgage payment.When You Shouldn’t Pay Your Mortgage Off in 5 Years
Eliminating your mortgage debt in the next five years probably sounds amazing, and it is, but there are other financial aspects to consider. While this doesn’t mean you can’t pay off your mortgage early, it depends on your personal situation; sometimes, a less aggressive repayment schedule might work better, like opting to pay off your mortgage in seven years rather than five.You Don’t Have Other Savings
Being a homeowner, unexpected expenses pop up more often than you like, and you need to be able to pay for them when this happens. If you don’t have money saved up for these events (like a 6-month emergency fund), it might be best to do that first before planning to pay your mortgage off more quickly.
