With housing prices continuing to skyrocket across the country, current homeowners find themselves in an envious position. Watching the value of their homes increase every year, many are eager to sell and cash in. Others want to utilize the value of their home for borrowing purposes.
Whether looking to sell or borrow, paying off the mortgage as soon as possible is the best way to maximize the amount of money you’ll make or receive. With this in mind, let’s take a look at six of the most common ways to pay off a mortgage faster:
Increase the Monthly Payment
The easiest way for homeowners to speed up the mortgage repayment process is to increase the amount they pay each month. Doing so is easier said than done, but those who recently received a raise at work or paid off credit card debt might consider putting that money towards their mortgage payment. Doing so chips away at the principal, which not only means fewer payments overtime but less interest paid as well.
Use HELOC
A home equity line of credit is a loan that lets homeowners borrow against the equity in their homes. Since the interest rate on a HELOC tends to be lower than the one attached to a mortgage, homeowners are using HELOC to pay off mortgage obligations faster than they otherwise would. With that said, getting approved for a HELOC doesn’t happen overnight. It may take several months for all the paperwork to go through.
Apply for Refinance
With interest rates at record lows, many homeowners opt to refinance their existing home loans for a lower interest rate. Doing so enables them to pay more towards the principal each month, leading to a faster repayment process over the next several years. However, not everyone has the discipline to dedicate the savings to the monthly payment going forward. While there’s nothing wrong with using the money to pay for repairs or upgrade the kitchen, it won’t help get your mortgage paid off faster.
Rent It Out
Doubling the mortgage payment each month is not easy for most homeowners. However, if the home is a multi-unit dwelling, the owner can rent one part out and put the rent money towards a larger mortgage payment each month. The drawback to renting out is the hassles and headaches that come with life as a landlord, often amplified if the landlord and renter live under one roof.
Sell & Stay
A relatively new method of paying off a mortgage faster is known as sell and stay. The homeowner sells their property but gets to keep living there indefinitely. The mortgage is paid off because the home gets sold, while the homeowner gets to stay. It’s a popular option for those facing foreclosure, those looking to sell their home to finance the purchase of a new one, and those trying to start a small business.
Reverse Mortgage
Similar to sell and stay options, reverse mortgages are different in several ways. The primary distinction is that a reverse mortgage is a loan, whereas sell and stay is not. Reverse mortgage solutions are relatively lax in terms of restrictions but still come with strings attached. These caveats vary from one situation to another, so it’s essential for property owners to carefully scrutinize a reverse mortgage agreement before signing. If necessary, have a lawyer look it over.
With property values at record highs and interest rates at record lows, homeowners are eager to pay off their mortgages as soon as possible. However, before doing so, it’s essential to go over each option. Doing so increases the chances of choosing wisely.
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