Congratulations to all those owners out there who still have super-low interest rates! You have managed to survive this crazy real estate market unscathed, but why stop there when you can leverage this opportunity to build equity rapidly and position yourself for future financial gains? In this article, we’ll explore savvy strategies to pay off your mortgage loan quickly, maximize your equity, and prepare for a potential surge in home sales and prices when interest rates inevitably come back down.
Let’s start with the obvious, making extra payments towards the principal balance. Even small additional payments each month can make a big difference in reducing your overall interest costs and shortening the life of your loan. Make sure you apply the funds directly to the principal. Anything you send in that is above the monthly payment, the bank will automatically apply towards a pre-payment and not towards the actual loan balance, unless you specify it.
One great hack to reduce principal without spending anything extra is a biweekly payment schedule. Switching to a biweekly payment schedule can help you pay off your mortgage sooner without feeling an impact on your monthly budget. By making half of your monthly payment every two weeks, you’ll end up making one extra payment each year, resulting in substantial interest savings over time and a shorter payoff period. This small modification can position you to pay your loan off up to ten years early.
The last way to take advantage of opportunities to build equity faster is to make lump-sum payments towards your mortgage whenever possible. Whether it’s from a work bonus, tax refund, inheritance, or other sources of extra income, applying these funds toward your principal balance can substantially reduce your loan term and increase your equity position.
If you have a higher interest rate, and subsequently, that higher-than-ever mortgage payment, hold tight and plan to refinance when the time is right. If and when possible, try to apply some of these hacks so when it is time to refinance, or maybe sell, you will be in a great financial position.
Paying down your mortgage balance quickly ramps up your equity, and positions you to be in a strong financial position, capitalizing on future opportunities in the real estate market. As interest rates eventually come back down, you’ll have the flexibility to refinance for lower rates, tap into your equity for other investments, or leverage your home’s value for a potential sale or upgrade.
Implementing these savvy strategies and taking advantage of low interest rates today, can accelerate your equity growth and prepare you for the great real estate potential opportunities that lie ahead!
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