How to Pay Down a Mortgage or Refinance
A home loan is likely the largest debt you'll ever assume. Paying off a mortgage or a refinance can be extremely gratifying -- it gives you immense financial security and confidence. There are several strategies you can employ as you try to pay down your mortgage or refinance, but you must be careful to be fiscally responsible as you do so.
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Instructions
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Use cash on hand to pay down chunks of your mortgage. You can use: retirement funds (401k, IRA or stocks), other investments (CDs, mutual funds), savings, emergency funds. You must think carefully before liquidating these accounts, though, as equity is not liquid.
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Add extra money each month to your mortgage payment. This requires an adjustment to your personal budget. Track all expenses for one month, and look for ways to trim certain areas. Entertainment and eating out expenses are normally the least painful cuts, and the savings can be applied to your mortgage. (Make sure to call your lender if you plan to pay extra; they need to know to put this directly toward your principal balance.) Some companies allow you to simply note the extra payment on the statement you send in -- but you should confirm this practice (usually by calling the customer service department) prior to sending extra payments.
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Sell any material possessions or assets you no longer need or enjoy. This can include: recreational vehicles, boats, antiques, collectibles, or other real estate. Large ticket items can bring in a cash windfall that can significantly reduce your mortgage balance.
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Consider bi-weekly payments. This is also called an acceleration program. When you pay half your mortgage bi-weekly, you end up making 26 half payments each year, or 13 full payments. While this is a slower strategy, you'll save thousands -- sometimes even years on a mortgage -- over a 20- or 30-year mortgage.
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