We have a 15 year fixed rate mortgage, but our plan is to pay it off much faster than that. To achieve this goal, we need to put as much money as possible into our mortgage. Not only will this return us to debt-free status, but it will greatly reduce the total amount we will pay for our house by reducing interest.
Bill Ryze, Tennessee-based Certified Chartered Financial Consultant (ChFC) and board advisor in Fiona, says, “As your principal decreases, so does the interest charged on it. As a result, you save a lot of money in the long run.” So if you’re in the same boat and want to get rid of your home debt as quickly as possible, here are four ways to put more money into your mortgage.
In recent years, there has been a lot of talk about rising food prices. According to the USDA’s Economic Research Service, the consumer price index (CPI) of food purchases at grocery stores rose 1.2% from January 2023 to January 2024, but food purchases at restaurants rose 5.1% over the same time period .
If you’re not used to cooking at home, this might take some practice, but it can really help keep your food costs down. According to Bureau of Labor Statistics surveys in 2022, people spend about $300 a month on takeout.
Branson Knowles, head of US digital banking at Top Mobile Banks, says: “If you become a master chef who cooks delicious meals at home, packs lunches and skips the expensive daytime cafe, you’ll be amazed at how much you can pay on your home loan when you’re not constantly spending on food at restaurant.”
Ditching takeout in favor of cooking at home or planning just one or two meals out can help you put a little more money towards your mortgage and 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 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 feels like you can’t go out without spending $100.
Finding free activities can go a long way toward putting more money into your mortgage. Libraries and local community groups often offer free activities such as workshops, walks, classes and more. When my family and I did a free local scavenger hunt, we won $100, so it was really worth it!
Have an accountability partner.
If you are paying off the mortgage with your partner, then that person is the logical choice. But if you’re single, finding someone who can help you stay on track can help you put more money toward your mortgage. Paying off debt can be difficult and frustrating, and my husband and I go through streaks where we are very committed and others when we just want to buy something with money that would otherwise go toward a mortgage.
Holding each other accountable and dreaming together about what life will be like without this debt hanging over our heads usually results in skipping shopping and using that money for a 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 fee that mortgage companies add to protect against defaults, and the borrower is responsible for paying.
Fortunately, if you pay down the principal to the point where you have at least 20% equity in the property, Ryze says “you can consider getting an appraisal to eliminate PMI. As a result, you reduce your mortgage payment.” This could give you more money to put toward the principal each month.
Know that a little goes a long way.
On a 30-year, $300,000 loan with an interest rate of 7%, paying an extra $50 each month can reduce the repayment 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.
Only by keeping the end game in mind—paying off your mortgage—will you likely be able to find more ways to put more money toward your mortgage and, ultimately, lower the total amount you’ll pay for your home. And according to Tim Schmidt, vice president of business development at the Cayman Financial Review, “Owning an unencumbered home is among the strongest forms of wealth and independence, and paying off your mortgage is one of the smartest choices you can make for long-term wealth.”