Indebted Millennials: Here’s How to Pay Off Your Mortgage Fast
Millennials are now buying more homes than boomers, Gen Xers, and Gen Z. But despite their growing love of property ownership, debt continues to haunt Americans between the age of 25 and 40 years old.
Mortgage, childcare, utilities, groceries, medical care. The bills never stop coming. In a world where inflation is becoming a real concern for economists, how can we expect millennials to make ends meet without relying on credit?
One thing is for certain: owning a home outright is still a worthwhile goal. And paying less over time, even if you sign up for a 30-year mortgage, is still a doable task.
So how do you go about paying off your mortgage and doing so while saving money for the future?
Below are five completely practicable strategies anyone can put in action to pay off their mortgage without emptying their wallet.
1- Never Eat Out — Use the Extra Cash to Make an Additional Payment Each Quarter
Sounds crazy, right? But going out to eat or getting takeout regularly will cost you much more in the long run.
The median monthly mortgage payment between $1,000 and $1,100, it’s not a bad idea to plan around saving enough each month to put down an extra house payment each quarter. By doing so, the average homeowner could pay off their mortgage 11 years early and end up saving over $65,000 in interest alone!
While saving $260 per month might not be quite enough, it’s a good starting point.
2- Be Clever About your Bills: Make Biweekly Payments and Get Done with your Mortgage Faster
When you close a deal on a mortgage, payments are done monthly by default, which comes down to 12 payments a year. When you pay twice a month and send out a check with half of your monthly amount every two weeks to the lender, you end up making 26 biweekly payments. Or, in other worlds, 13 monthly payments.
That extra payment, mortgage experts explain, helps you pay less total interest while lowering your principal balance. However, you must be careful how you set up the biweekly payment.
While many lenders already offer biweekly payment options, others don’t. If the homeowner is forced to set up his or her payment with a third-party service, they will have to pay fees to these companies that will eat into the potential savings.
The best way to make biweekly payments is to set it up yourself. Nerdwallet has a great explanation of how to do this.
3- Planning on Staying Put for At Least 15 Years? Refinance!
If you plan on staying in your home for at least the next 10 to 15 years, taking a look at the available refinancing options could help you save in the long run.
Even if monthly payments increase considerably, interest costs will be dramatically lower, helping you save thousands of dollars in the long run. However, refinancing isn’t for everyone.
If your cash flow is currently tight or you’re having a hard time making most of your payments as it is, refinancing might not be the best option. With a shorter mortgage plan and higher monthly payments, you run the risk of defaulting, putting your property — and credit score — at risk.
4- Skip the Starbucks Run and Send Extra Cash for the Principal Each Month
We get it: caffeine is not a luxury, it’s a need. But making coffee at home can be just as rewarding as going out for a cup (or ten). While your caffeine fix won’t come with all the bells and whistles Starbucks can provide, it will help you save a good amount of cash.
According to some estimates, skipping Starbucks can save you up to $2,300 per year. If you can put that money aside each month, you can put it toward your mortgage’s principal payment. That is especially true if you have a natural tendency to spend your “savings” before you can do anything major with it.
According to Robert R. Johnson, a Heider College of Business at Creighton University finance professor, sending extra money for the principal monthly is “best for individuals who lack the discipline to save.”
To make it work, all you need to do is add an even amount to the payment total and make sure to confirm with your lender ahead of time so the firm is aware the extra cash is applied to the principal. Over time, the additional payments will help you reduce your mortgage term and interest.
5- Got Extra Money from a Side Gig? A Cash Gift? Inheritance? Send it to the Mortgage Company!
Any extra income that might not be part of your monthly hustle can be used to save you money in the long run.
If you performed a side gig, got a bonus from your boss, some money from an inheritance, or a distant relative sent you a birthday card filled with cash, you might want to apply some of that toward your mortgage. Any added payment can help you lower your mortgage term and interest. Best of all, it won’t hurt your regular monthly budget, making you feel like you didn’t spend anything extra at all!
If you know how to save, setting up a plan to save extra money regularly to help you save big in the long run will feel like a breeze. But if you are like a great deal of young Americans saving is hard as it is, but making regular payments or simply sending anything extra you have on hand to the lender is also an effective strategy. In no time, you will be able to say proudly, “I own my home outright!”
Believe it or not, the feeling of accomplishment is worth it. And you can always use your house as leverage if your career takes a turn for the better and you decide to upgrade or buy more property.