One of the critical steps involved in looking for a home is the process of negotiating for a mortgage. Many people dread this process because they find out exactly how much money they are going to have to pay each month. At the same time, this is also an opportunity for people to negotiate for more favorable terms.
Think about options, such as waiving origination fees, reducing points, and asking for a lower interest rate. In the end, most are locked into a mortgage that will last from 15- to 30-years. As the months start to roll by, losing a large chunk of that paycheck will start to get old. Fortunately, there are ways to pay off a mortgage more quickly.
1. PAY MORE EACH MONTH
The first option is to pay more than the minimum loan payment each month (or increase the frequency of the payments). Increasing the amount of each payment will ensure that extra dollars are being applied directly to the principal. This will reduce the amount of interest paid over the loan’s life, therefore allowing for a quicker payoff.
2. REFINANCE THE MORTGAGE
Another option to consider is to refinance the loan with a different lender with more favorable terms. This could allow you to secure a payoff date that isn’t so far into the future. This is a great idea if interest rates have dropped since the mortgage was first installed. Refinancing at a lower interest rate can help you pay off your mortgage faster, but it will likely impact your monthly payments.
3. SPLIT THE PAYMENT IN HALF
Finally, here is a creative approach that may work for you especially if you collect a paycheck every two weeks. Split your monthly mortgage payment in half. Send payment for that amount to your loan provider every two weeks. This approach allows you to submit one extra monthly mortgage payment each year. This added payment goes directly toward the principal and can cut years off of the life of your loan. Check with your lender — they may have options like this that you can enroll in right from origination.
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Dedicated to providing exceptional, personalized service, Real Estate Broker Mike Flannagan takes pride in the relationships he builds, working relentlessly on your behalf. Mike is a Northern Virginia real estate expert with extensive experience in Fairfax, Loudoun, and Arlington Counties. Click here to get to know him better.
