Purchasing a home is a joyous occasion. There is one thing that feels even better – paying off your mortgage. Have you looked at your amortization schedule and realized you’d be retirement age before you can pay the balance off? Don’t despair. Here are five unique ways to pay off your mortgage quickly.
1. Short Term Rental
Do you live in a high tourist area in a trendy neighborhood, perhaps a nice one-bedroom place in a popular city like Chicago? Is your backyard what Instagram photos are made of? Do you have an apartment above your garage or an in-law suite by the pool? Maybe you have a view of a forest, lake or beach? Any of the attributes that made you fall in love with your house can also be used to turn your home into a short term rental for travelers and tourists.
List your house, room, or couch on Airbnb, VRBO, or any other reputable short term rental site to make extra money you can add to your mortgage payment. If you’re in the home while hosting, interacting with your guests by giving a recommendation, or providing a meal goes a long way to stellar reviews and 100% occupancy. Ensure your homeowners’ association and local laws allow for short terms rentals, so you don’t get fined or into legal trouble.
2. Long Term Rental
Perhaps a rotation of strangers in your space is not your cup of tea. You can always rent any extra space to your friends and family. The rental income can be applied directly to your mortgage each month, and you can claim repairs and other expenses on your taxes. This is especially helpful if you found a large house with tons of space. You can rent multiple rooms which can add up to another mortgage payment, knocking out hundreds, if not thousands, in interest.
3. Hosting Events
If you don’t want visitors to stay very long, you have other options. Did you know that Hollywood celebrities will rent out their homes for photo shoots and dinner parties to offset the costs of their astronomical mortgages and property taxes? These events are an easy way to use your asset for extra money towards your mortgage. Build relationships with catering companies, photographers, and event planners so you can have a steady stream of contracted work throughout the year.
4. Accelerated Payments
Did you know that some banks and credit unions offer biweekly mortgage payments? By applying half of your payment biweekly to your balance, you can pay down the principal faster, therefore reducing your interest over the life of your loan. If you make 26 payments per year, that is the equivalent of making 13 monthly payments to your mortgage.
To take it to the next level, refinance your mortgage to a 15-year mortgage with biweekly payments. Your payment will be higher, but you’ll pay off your loan much faster than a 30-year mortgage, and you will pay less in interest. Make sure your mortgage does not have pre-payment penalties. This sneaky bank clause will keep you in debt longer than necessary.
Rounding up each payment is a flexible alternative that doesn’t require paperwork, guests, or roommates. As long as you don’t have a pre-payment penalty, you can overpay your monthly or biweekly payment each time. You can round to the next dollar, next ten, next fifty, next hundred, or next thousand, etc. of your choice. You can set this up through autopay or manually when you make your payments each month. Make sure your roundup is applied to your principal to reduce your accumulated interest over the life of your loan.
Windfalls. If your focus is paying down your mortgage, then you can apply any additional money you receive throughout the year as a principal-only payment. This could be a tax refund, bonus, inheritance, or lottery winnings, for example. The faster you pay down the principal, the faster you’ll pay off the entire balance and reach mortgage freedom.
Paying off debt is an amazing feeling. Paying off a large debt makes it even more satisfying. Living in your home mortgage free is the holy grail. Try the methods out and find which one works best for you. Challenge yourself to find other ways to pay off your mortgage quickly.