One of the biggest pieces of debt that you’ll have to pay off in your lifetime is your home mortgage. While many people get a 15- or 30-year mortgage, it often doesn’t make sense to take that long to pay off the balance that you owe, especially if you’re theoretically able to pay it down faster. Not only would doing so allow you to get out of debt sooner, but it can actually save you a ton of money on interest that you would have been paying.
To help you see how this can be a possibility for you, here are three ways to pay less interest on your home loan.
Recast Or Use An Offset Account
A couple of great options for paying less interest on your home loan, according to Natalie Campisi, a contributor to Bankrate.com, is to either recast your home loan or work with an offset account.
When you recast your home loan, you’re able to keep your existing loan, pay a lump sum toward the principal, and then see how your new balance will adjust your amortization schedule. By doing this, the term of your loan will be shorter, which means you’ll be paying less money on your loan in the long run.
As for working with an offset account, this allows you to put away money in a separate account that is then subtracted from the total amount that you owe on your loan, resulting in you being charged less interest because the principal amount of your loan has shrunk.
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A more traditional route to go as far as paying less interest on your home, Chris Hogan, a contributor to DaveRamsey.com, shares that you might want to look into refinancing your home loan. By doing this, you may be able to get a better interest rate, which could help you save a lot of money. Additionally, if you go from a 30-year mortgage to a 15-year mortgage, you’ll also save on interest because you’ll be paying off your debt faster, which gives you less time to accumulate more interest fees.
Make As Many Extra Payments As Possible
If you’re wanting to save on interest without having to go through the process of working with your lender or adjusting your actual mortgage, Tim Plaehn, a contributor to SFGate.com, suggest that you simply make extra payments toward the principal of your loan.
Before you attempt to do this, you’ll want to be sure that you won’t incur any prepayment penalties and that the extra payments will be applied directly to the principal. But if this is the case for your home loan, try to make as many extra payments as you can to knock down what you owe and pay less interest over time.
If you want to pay less interest on your home loan, consider using the tips mentioned above to help you find out some ways you may be able to accomplish this.