By consistently paying your mortgage bill on time, you’re showing your lender that you’re a responsible borrower. That may be obvious, but what’s often overlooked is the art of making extra mortgage payments. Paying more than you’re required to can benefit you in several different ways, including reducing the amount of interest you pay over time. If you’re interested in making extra mortgage payments, here’s how to do it.
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1. Contact Your Lender First
Before you start making extra mortgage payments, it’s important to speak with your lender. Without letting your mortgage lender know that you want your extra payment to go toward reducing your principal loan balance, he or she may think that you’re simply paying your next mortgage bill early. That won’t help you get rid of your mortgage debt any faster.
2. Use the Money You Receive on Special Occasions
The cash you get on your birthday is more than just a nice gift. While there’s nothing wrong with using that extra money to treat yourself, it may be better to think of it as a financial opportunity.
If you can’t afford to make extra mortgage payments year round, you could focus on paying off your mortgage whenever you expect to have extra cash in your pocket. For example, since the holiday season happens at the same time every year, you could plan to make extra mortgage payments near the end of the year.
Related Article: Understanding Mortgage Amortization
3. Get a Separate Account for Your Mortgage Payment Funds
If you’re serious about knocking out your mortgage debt, having a separate account for the money that you’ll use to pay off your home loan could be a good idea. If remembering to set aside money for your extra mortgage payments seems daunting, there are free services that can do it for you.
Many banks automatically transfer funds from their clients’ checking accounts to their savings accounts. You could also ask to have a percentage of your paycheck sent to a separate account for your mortgage payments every two weeks or every month.
4. Start Freelancing
Extra mortgage payments are the kind of thing that side hustles are made for. Freelancing on the side may not only boost your career but it can also leave you with more money to put toward paying off your mortgage.
Related Article: How to Pay Off Your Mortgage Early
If you’re eager to ditch your mortgage debt, making extra mortgage payments could be an effective strategy. But making certain mistakes – like forgetting to ask whether there’s a penalty for paying off your mortgage early – could cost you in the long run.
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