There are a lots of ways on how you can shorten your loan period and with the same save a lots of cash in interest on your mortgage. Today we will cover one strategy you can use and in the future there will come more strategies.
Step 1) Refinance to a shorter term
As I mentioned in the previous article about mortgage the most popular home loan is the 30-year-loan.
The shorter repayment periods of course means higher monthly payments however you will have less interest over the life of the loan.
Step 2) Make extra principal payments
Another step here is to ay off your home loan faster is to simply pay extra whenever you are able to do so.
Most mortgage loans which are issued after January, 10th 2014 doesn’t charge prepayment penalties. Which means that you can pay more money toward your mortgage balance each month without any penalty or extra fees for it
Step 3) Make one extra mortgage payment per year
This on is all about making your mortgage payment every other week instead of paying the full amount once a month.
This step is also known as “bi-weekly payments.” When you use the “bi-weekly payments instead of monthly payments you sort of end up adding one extra payment each year.
Step 4) Recast your mortgage instead of refinancing
Keep in mind that mortgage recasting is very different from refinancing and this is because you get to keep your existing loan.
Here in this step you simple just pay a lump sum toward the principal. And the bank here will adjust your payoff schedule to reflect the new balance. And the result of this step will be a shorter loan term.
The biggest benefit why you should do this step is to recasting is that the fees are significantly lower than refinancing.
Step 5) Reduce your balance with a lump-sum payment
This step is sort of an alternative to recasting is to make lump-sum payments to your principal whenever you can.
Inherited money? Bonus at job? or whatever use it on the lump sum payment.
Since both the VA and the FHA loans cant be recasted, the lump-sum payments might be the next best thing.