We have a 15-year fixed-rate mortgage, but our plan is to pay it off much faster than that. In order to accomplish this goal, we have to put as much money towards our mortgage as possible. Not only will this get us back to being debt-free, but it will also greatly reduce the total amount we’ll pay for our house by reducing the interest.
Bill Ryze, a certified Chartered Financial Consultant (ChFC) from Tennessee and a board advisor at Fiona, says, “As your principal debt decreases, so does the interest charged on it. As a result, you save a lot of money in the long term.” So, if you’re in the same boat, and want to get rid of house debt as quickly as possible, here are four ways to put more money towards your mortgage.
There’s been a lot of talk in recent years about the rising cost of groceries. According to the USDA Economic Research Service, the Consumer Price Index (CPI) of grocery store food purchases rose 1.2% from January 2023 to January 2024, but restaurant food purchases increased by 5.1% in the same time period.
If you’re not used to cooking at home, this one might take some practice, but it can really help cut down on food expenses. According to the Bureau of Labor Statistics 2022 Consumer Expenditure Surveys, people spend about $300 per month on takeout.
Branson Knowles, the head of U.S. digital banking at Top Mobile Banks, says, “If you become a master chef cooking delicious meals at home, packing lunches, and skipping the pricey daily coffee shop, you’ll be amazed at how much you can pay towards your home loan when you’re not constantly spending on restaurant fare.”
Forgoing takeout in favor of cooking at home or only budgeting for one or two meals out can help you put a little more money towards your mortgage and chip away at the principal, saving you interest in the long run.
The entertainment spending category can add up quickly. Drinks at a bar or restaurant can cost $15 each or more, and movie tickets cost about the same. Concerts, plays, cooking classes, museums, and other outings can also add up quickly. If you have kids, it often seems like you can’t walk out the door without spending $100.
Finding free activities can go a long way towards putting more money towards your mortgage. Libraries and local community groups often offer free activities like workshops, hikes, classes, and more. When my family and I did a free local scavenger hunt, we won $100, so it really paid off!
Have an accountability partner.
If you’re paying off a mortgage with a partner, then that person is the logical choice. But if you’re single, finding someone who can help keep you on track can help you put more money towards your mortgage. Paying off debt can be hard and frustrating, and my husband and I each go through streaks where we’re very committed and others when we just want to buy something with money that would otherwise go to the mortgage.
Holding each other accountable and dreaming together about what life will look like without this debt hanging over our heads typically results in skipping the purchase and using that money for the mortgage.
If you had a down payment that was less than 20% of the purchase price, you may have private mortgage insurance, or PMI. This is an additional charge that mortgage companies add to protect themselves against default, and the borrower is responsible for paying it.
Luckily, if you pay the principal down to the point of having at least 20% equity in the property, Ryze says “you can consider requesting an appraisal to eliminate PMI. As a result, you reduce your mortgage repayments.” This could give you more money to throw at the principal each month.
Know that a little goes a long way.
On a 30-year $300,000 loan with a 7% interest rate, paying an extra $50 each month can reduce the payoff period by two years and three months. It can also reduce the total interest by just over $38,000. This would reduce the total payment over the course of the loan to $680,120 from $718,515.
Just by keeping the endgame in mind — paying off the mortgage — you’ll likely be able to find more ways to put more money towards the mortgage and, ultimately, reduce the total amount that you’ll pay for your home. And according to Tim Schmidt, VP of Business Development at Cayman Financial Review, “Owning an unencumbered home is among the strongest forms of wealth and independence and paying down your mortgage is one of the smartest choices you can make for long-haul wealth.”