How to Pay Down Mortgage Loans Quicker

Paying down your mortgage loans quicker requires careful financial planning to ensure that the payoffs save you money in the long term. Multiple methods exist for shortening the loan length. Each method has its own pros and cons, and each ends up costing you financially to implement. All methods lead toward the same goal, however: removing the high-debt burden that a mortgage can add to your budget. Paying down early requires that you work closely with your mortgage company to make sure your extra payments are applied to the loan principal and not considered early normal payments on the loan that are applied to the interest.

Instructions

1

Contact your mortgage company and refinance your mortgage to shorten the repayment length. Cut the length of a 30-year mortgage through refinancing to 20 or even 15 years to decrease the total interest charge on the mortgage and pay off the loan sooner. Reducing the time span leads to a higher monthly payment amount, though, so check that you can afford the payments in your budget before making the change.

2

Refinance the loan to achieve a lower interest rate while continuing to make the same payments on the loan. Lowering the interest rate reduces the actual monthly loan amount. Paying the same amount each month, however, applies the excess payment above the new monthly amount directly to the loan principal. By paying down the principal, you reduce the total length of the loan. If your current mortgage holder won't refinance, shop around for a lender who will.

3

Change to a biweekly payment plan or add an extra payment once a year. By paying biweekly, you add the equivalent of a 13th full mortgage payment every year. You can apply the single extra payment a year directly to the principal, reducing loan length and retiring the loan sooner. Discuss excess payment options with your lender to ensure that they're allowable under your mortgage terms.

4

Apply any excess funds in your budget to the mortgage. Tax returns or yearly bonuses applied to your loan reduce the total remaining amount, shortening the loan length with each payment applied.