The pandemic took a toll on the housing market with record-low mortgage sales sparking a millennial home-buying frenzy. According to a report by CNBC, home demand surged to blockbusting sales, the highest sales ever for the housing market since 2006. The downside to increased demand is, of course, low inventory from the sweep of massive closings nationwide. Thousands of homeowners were eligible to refinance their mortgage loans during the quarantine phase and decrease their interest from 3% rates to 2.75% or lower. Although lower interest rates are a silver lining, the rise in market prices still prevents new homeowners from quickly paying off their mortgage loans. In today’s blog, Foundation Credit Union will touch on some tips to quickly pay off your mortgage and live debt-free.
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Budget Your Debt to Income Ratio
If you want to pay off your 15 or 30-year mortgage loan quickly, start by calculating your total monthly expenses compared to your monthly household income. To calculate this ratio, follow this formula:
- Add up all your monthly debt obligations
- Divide this number by your monthly income (before taxes)
- Multiply the result by 100 to get a percentage
Your debt-to-income ratio should lie under 36% to indicate where your expenditures and gross income lie. Evaluate where you can cut expenses to increase savings for a bit while budgeting ensures your finances lie in an optimal fiscal range.
Start with a Higher Down Payment
More money = less payment on interest. If you are a first-time homebuyer, saving up for a higher down payment will benefit you in the long run. Not only will putting down more money decrease your mortgage loan size, but it will also lessen the amount of interest accrued over time. Increased interest for borrowers can total up to thousands over a 15-30 year span. The team at Foundation Credit Union recommends putting at least 20% down for the price of the house. Larger down payment will lower your LTV (Loan-to-Value) ratio to avoid getting charged with high interest.
Refinance to shorter-term
If you are on a 30 year fixed mortgage loan, refinancing to a 15-year will benefit your expenses over time. Refinancing to a shorter-term means higher monthly payments but less interest. The amount may seem higher initially, but compared to costs over 30 years, homeowners are saving thousands more than they would with a long-term loan. Talk to your lender about your refinancing options and start living up to your financial freedom.
Increase payment frequency
The more payments you make towards your mortgage loan, the sooner you can pay it off. Instead of monthly, try switching bi-weekly payments or paying a more considerable sum each month. Extra payments do not mean breaking the bank, so don’t panic. Contributing an additional $100 to $200 a month towards your mortgage loan will make a big difference over your term. The Foundation credit union loan officers will help guide and navigate your options to pay down your principal amount. Get in touch with our Missouri office locations today.
Find Creative Alternatives to Making Money
There are various ways to supplement your monthly income if you choose to. Do you enjoy creating crafts, teaching, selling online, or having some old items you are looking to give away? With this booming digital age, individuals are profiting from their talents or household items every day. Statistics show that small businesses, e-commerce sales, and online services contributed to over 400 billion in 2020 alone. If you are a Millennial homeowner looking to pay off your mortgage loan faster, getting involved in the online market is a great place to start! These are just a few of the numerous methods you can use to supplement your household income.
Pay Off Your Mortgage Loan With Foundation Credit Union
Are you looking for more options for your mortgage loan? The team at Foundation Credit Union is here to help. We offer personal, savings secured, and home loans at affordable rates suitable for any investor or home buying needs. Contact us online or call 417.895.2770 today for more information on how to help you accomplish your financial goals.