SAVING WHILE PAYING OFF YOUR MORTGAGE
21 Jan, 2022
If you’re wondering if you should save money or pay off your mortgage, you probably wonder if you can do both at the same time.
While it’s a juggling act, it is possible to do both. In fact, it’s best to save and pay off your mortgage rather than focusing on just one or the other. Saving money ensures you have enough money for emergencies and financial goals, while paying your mortgage off helps you save money on interest.
Is it Possible to Save and Pay off your Mortgage at the Same Time?
It is possible to save money and pay off your mortgage at the same time and you don’t even have to be rich.
All it takes is a budget and intentional use of your money to help you achieve your goals. Yes, you may have to sacrifice a little bit, but you’re sacrificing now to ensure a successful future. It’s a good tradeoff and one you’ll be glad you did in the future.
So how do you save and pay off your mortgage? First, let’s look at how to pay your mortgage off early.
Five ways to Pay off your Mortgage Early
Most people assume to pay their mortgage off early, they need a large lump sum of money to pay it off, but you don’t. With regular ‘extra’ payments, you can pay your mortgage off early. Here are some easy-to-implement tips.
- Make bi-weekly payments - Instead of making one monthly payment, split your payment in half and pay that amount every 2 weeks. Since there are 52 weeks in the year, you’ll make 13 payments a year, or one extra annual payment. This will knock down your principal balance and save you money on interest. Even with one extra payment a year you can knock a few years off your mortgage.
- Bank windfalls - If you come into money, such as a tax refund, work bonus, or gift, consider putting it toward your mortgage. Even if you want to spend some of it, keep a portion of it for your mortgage. The lump sum will knock your principal balance down and decrease the interest charges.
- Pay more than the mortgage payment each month - Work room into your budget to pay extra toward your mortgage payment each month. Even if it’s $100, that’s an extra $1,200 a year that goes directly to your principal. This reduces the amount of interest you pay over the life of the loan.
- Make one extra payment each year - If you can’t make a lump sum payment, divide your mortgage payment by 12 and pay that amount each month in addition to your required mortgage payment. At the end of the year, you’ll have made an extra mortgage payment.
- Make 15-year payments on a 30-year loan - If you can afford 15-year payments but like the security of a 30-year loan, use a mortgage calculator to determine your 15-year payments and when you can make that payment instead of your 30-year payment to knock your balance down faster.
X Tips to Save While Paying off your Mortgage
While you pay your mortgage down, it’s possible to save money using these simple tips.
- Automate your savings - Work a certain amount of savings into your budget, making it a line item, and then set up automatic deposits to ensure you save. If you take the work off your shoulders, you’re more likely to save before you spend.
- Cut back on your expenses - Take a quick look at your bank statements and see where you overspend. Categories your spending and decide what you can out to save money. A few ideas are eating out, coffee shop stops, impulse buys, or nail/hair appointments. Any money you save by cutting back automatically send to your savings account.
- Shop for cheaper insurance and other services - If you haven’t shopped for cheaper insurance lately or you have the same cellphone provider from 10 years ago, chances are you are overpaying. When you’re a new customer, you have access to better deals, aka more savings. Bank the savings and you’ll save money while paying down your mortgage.
- Don’t use credit cards - Don’t treat credit cards like an extension of your income. If you can’t pay for something in cash, don’t buy it. That doesn’t mean you can’t use credit cards to earn rewards and have more money to save, but don’t use credit cards to buy something you otherwise couldn’t afford. The interest will eat up any money you could use to pay down your mortgage.
- Start a side gig - If you need a little extra income to reach your financial goals, start a side gig. You could be a freelance writer, drive for Uber, shop for Instacart, walk dogs, design websites, or sell crafty goods. The sky is the limit and any money you make you can use to save and pay down your mortgage.
It takes careful thought and budgeting to save while paying down your mortgage, but it’s possible. You just need to be aware of where you’re spending your money and when you can cut back.
Contact us for a no-obligation conversation. Valley Mortgage is the largest independent mortgage lender in North Dakota and northern Minnesota. We’ve been helping folks like you for more than 38 years. If you haven’t reviewed our website, click here. Please call us at 701-461-8450 to get all the details about home mortgages and refinancing. There’s no cost, no obligation. Valley Mortgage does all the processing right here in our Fargo, ND office.
If you use your money intentionally for your financial goals including saving and paying down your mortgage, you’ll reach your financial goals by having equity in your home and money in your bank account.
While your home’s equity is your money and money you can use if you need it, having an emergency fund in a liquid account is a better way to ensure you meet your financial needs and can handle anything that comes your way.