Depending on the mortgage loan you have, you may still have quite a few years’ worth of mortgage payments left. For these long-term loans, you’ll end up paying a large amount of interest in addition to the amount you were loaned. However, if you plan on saving and purchasing real estate in downtown San Diego, there are certain things you can do to reduce your mortgage debt or pay your debt off early.
1. Decrease Other Debt
Paying down other debt can make it easier to reduce mortgage debt. As you pay down credit card debt and other forms of credit, you’ll start to have more money that can then go toward the mortgage. You can either choose to make a one-time additional payment each year or take the amount you were paying toward your credit card debt and put it into your monthly mortgage payments. Additionally, focusing on getting rid of your other debt leaves you with a lot of options, including being able to create an emergency fund to keep your mortgage payments on time should you get injured in an accident or lose your income.
2. Refinance as You Go
In some cases, you may be able to lower your monthly mortgage payments, which would ultimately reduce your mortgage debt, by refinancing your current loan. Refinancing is when you replace your current loan with a new loan. This process can be advantageous for those who have a loan with high interest rates that are locked. Refinancing with a loan that has a lower interest rate means you end up paying less in interest, potentially allowing you to pay off your mortgage several years earlier than you originally planned. You may also end up paying less in the long run.
3. Make an Additional Payment
Most people make one mortgage payment a month. However, if you make one additional payment each year, those payments add up. With this strategy, you may be able to pay a 30-year mortgage in less than 25 years. Another way to make this type of strategy work is to set up a bi-weekly payment schedule. If the bank cannot set up this type of mortgage, a borrower could get around this by multiplying the amount of each payment by 1.083, which ends up being the equivalent of 13 months’ worth of payments every year.
4. Put Pay Raises Toward the Mortgage
When some people get a raise or a bonus, they may want to use that money to go on vacation or upgrade some of their furniture. However, some of the additional money can be put to good use by having it go toward the mortgage. For example, if 25 percent of a person’s income goes toward the mortgage, he or she could easily make incrementally larger payments after a raise. This strategy could shave years or even a decade of mortgage payments off.
Reducing or paying off your mortgage debt earlier is a good plan to consider if you own a loft or condo in downtown San Diego. If you need the help of an experienced real estate agent to purchase the home of your dreams, get in touch with 92101 Urban Living. Call 619-649-0368 to schedule an appointment.