Making monthly mortgage payments can sometimes feel like something you'll be doing for the rest of your life - but it doesn't have to be.
Paying off a 30-year fixed-rate mortgage early can save you a bundle in interest charges. For example, if you have a $220,000 mortgage with an interest rate of 4%, you can cut four years off your loan term and save over $23,000 in interest if you pay one extra payment of $1,051.31 per year.
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Here are 10 strategic planning and creative cost-saving measures that might require a sacrifice or two, but will help you pay off your mortgage early.
Should You Pay Off Your Mortgage Early?
Before you implement any of the following strategies, make sure that paying off your mortgage early is the best financial decision for you. First, check with your mortgage company to make sure that they accept extra payments without penalties. If they do, make sure you specify that any extra payments are meant to go toward your principal balance, rather than to the next month's payment.
If your mortgage company allows you to pay off your mortgage loan early and you have the financial means to do so, follow the below tips. There's no need to pay for a mortgage accelerator program - all of these strategies are things you can easily do yourself.
1. Rent Out Space in Your Home
Thanks to the new sharing economy, it's easier than ever to make money from the unused space in your home. You can rent rooms or your entire house to students or vacationers through sites like Airbnb or opt for long-term tenants while you live somewhere less expensive.
Sharing your space with strangers might sound uncomfortable, but you'll never know until you try it. Plus, hosting students and Airbnb guests can be a relatively short-term commitment. You don't have to keep doing it if you decide it's not worth the savings you'd get from paying off your mortgage early.
See: Should You Refinance Now With the Low Mortgage Rates?
2. Accelerate Your Mortgage Payments
Accelerating your mortgage payments might be the easiest way to pay off a mortgage loan early. If you make four extra mortgage payments each year - or an additional $4,201.24 - you'll save more than $63,000 in interest and pay off your mortgage early by 11 years, given a $220,000, 30-year mortgage loan with a 4% interest rate.
3. Make Biweekly Payments
The biweekly payments system is meant to shorten your loan's amortization schedule. So instead of making 12 full payments a year, you make a half-sized payment every two weeks, which adds up to 13 payments a year. With that extra mortgage payment, the principal balance of the loan gets reduced, which shortens the payoff period.
For example, if you have a $220,000, 30-year mortgage with a 4% interest rate, biweekly payments can shave off four years and around $24,000 in interest from your loan.
Some banks can set up this payoff plan for you, but you should probably do it on your own. That way, you won't be locked into a biweekly payment contract with the bank if you change your mind.
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4. Refinance Your Mortgage
Simply put, refinancing your mortgage is getting a new loan to replace the original. Refinancing your mortgage loan can help you in a couple different ways:
You can shorten the loan and commit to higher payments to pay off your debt sooner.
You can take advantage of better mortgage rates.
Refinancing could allow you to pay off your mortgage early and cut your interest costs, according to U.S. News. It might also eliminate private mortgage insurance, and those funds could then be used to pay off your mortgage principal, which will speed up the process even more.
5. Set a Payoff Date
Use an online mortgage payoff calculator to set a payoff goal that is challenging but attainable. The calculator will show you how much progress you can make toward paying off your loan by a certain date. Once you set your goal, you'll be more likely to stick to your plan.
Learn: How To Refinance a Mortgage
6. Increase Your Earnings
Take extra shifts at work, wait tables on the weekends, pick up holiday or seasonal work, freelance, consult, pet sit or do odd jobs. As you earn additional income from your side hustle, put it toward your mortgage loan balance.
7. Become Super Frugal
Start eliminating all unnecessary expenses: Cut cable, get cheaper insurance and stop eating out or buying new clothes. It might sound extreme, but it works if you use the money you save to pay off your mortgage early.
8. Make a Lump-Sum Payment
If you receive an inheritance, tax refund or bonus, apply it to the principal balance of your mortgage loan. The interest savings could be better than any potential investment.
9. Round Up Your Payment
Rounding up your mortgage payment, even by just a few dollars, can help you pay off the loan early. You can also use an app like Qapital to round up all your purchases and set aside the spare change for an additional payment. If you don't have a lot of room in your budget to put hundreds of extra dollars toward your mortgage loan each month, this strategy can help you chip away at your mortgage payment.
For example, by paying an extra $10 per month on a $220,000, 30-year loan at 4% interest, you can pay off your mortgage loan six months earlier and save $3,276.86 in interest.
If you really want to get rid of your existing mortgage, one way to do so is to consider selling your current home and using the profits to buy a less expensive one. You might not be able to buy a new house from the profits of the sale alone, but at least you will have a smaller mortgage that you will be able to pay back more quickly.
Of course, you should crunch the numbers to make sure that selling your current home is a smart move. There are a lot of expenses involved that could diminish your profits and leave you with a larger mortgage balance than you might anticipate having, such as closing costs, real estate agent commissions and any moving expenses.
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Cynthia Measom and Gabrielle Olya contributed to the reporting for this article.
This article originally appeared on GOBankingRates.com: 10 Fastest Ways To Pay Off Your Mortgage