10 Tips on Paying Your Mortgage Off Sooner

via Dave Ramsey/Twitter

Make 10 Percent Your Down Payment Minimum

One of Dave Ramsey’s top tips for buying a new home is to put down at least 10 percent on your new home. He says 20 percent is even better, as it will help you to avoid private mortgage insurance (PMI). “That’s an extra cost added to your monthly mortgage payment, and it doesn’t go toward paying off your mortgage balance.”

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Get a 15-Year, Fixed-Rate Mortgage

Dave Ramsey advises getting a 15-year, fixed-rate mortgage to save you big money in interest down the road. He suggests steering clear of a 30-year or variable rate mortgage. “When you have a 15-year mortgage from the beginning, you won’t be tempted to use that money for something else. You’ve got built-in accountability to get your house paid off fast!” Ramsey says.

Check out these 10 things you should know about down payments.

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A Monthly Mortgage Payment Should Be 25 Percent of Total Take-Home Pay

Ramsey urges the importance of knowing how much you can afford so you don’t wind up in financial trouble. To figure this out, first add up any income you bring in each month. “Let’s say you bring home $2,400 a month and your spouse makes $2,600 a month. Your total monthly take-home pay would be $5,000,” he says.

Next, multiply your monthly take-home pay by 25 percent. This will give you your maximum mortgage payment.

“If you earn $5,000 a month, that means your monthly house payment should be no more than $1,250.”

“You could afford these options on a 15-year fixed-rate mortgage:

• $187,767 home with a 10% down payment ($18,777)
• $211,238 home with a 20% down payment ($42,248)
• $241,415 home with a 30% down payment ($72,424)
• $281,650 home with a 40% down payment ($112,660).”

Here are 10 important things to consider when buying a house.

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If You Have PMI, Get Rid of It As Quick As Possible

Private Mortgage Insurance or PMI is requirement for borrowers who make a down payment of less than 20 percent and provides some security for lenders against potential defaults on the loan. PMI typically costs between .5 percent and 1 percent of the entire loan, which could mean an extra $1,000 or so a year that doesn’t go toward paying the principal of your loan.

Here are tips on how to get rid of PMI.

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Make Extra Payments

Be sure to check with your mortgage company before making extra payments first because some companies only allow extra payments at certain times. But if you can make extra payments it’s a good idea because you will pay down on the principal quicker and you buy yourself some extra time in the house should life events change. You can make a note with the payment that you want it applied to the principal rather than the next month though. These creative ways will help you stash away some cash.

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Try Bi-Weekly Payments

Dave Ramsey says that by paying your mortgage bi-weekly, you could potentially knock off eight years from a 30-year mortgage, depending on the interest rate. You’ll need to check with your lender to see if you can arrange bi-weekly payments. Find out how one man saved $150,000 by adopting minimalist ideas.

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Pay Your Mortgage Like It’s a 15-year Mortgage

Much like making extra payment, pretending your 30-year mortgage is actually a 15-year mortgage will help you pay off your mortgage significantly faster, plus save you thousands on interest. It takes discipline and proper budgeting but it can be done.

These are our top 10 tips on how to save money at home.

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Downsize

If your empty nesters or have grown tired of paying your mortgage, you should consider downsizing. The money you’ll gain from the sale of the home could potentially be put toward your mortgage on the new home and make it easier for you to pay off the balance quicker.

These are 12 signs it’s time to downsize.

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Recast Your Loan

Recasting your loan can be a helpful tool in paying off your mortgage sooner. If you come upon a lump sum of money you can put it toward the principal of the loan and have the loan reamortized. Lenders have different requirements on how much you can put toward the principal so be sure to check with your lender.

You can refinance your loan in just seven steps.

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Round Up Your Payment

An easy way to help pay your mortgage faster is to round up on the amount you send to the lender. Your mortgage will likely have some decimals involved or might end in a number that you can round up. All of those additional dollars can help pay down the principal and will add up over time.

Try any of these 35 brilliant ways to save money around you home so you won’t feel the impact of rounding up that much.