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Being debt-free is a common goals for many people. Because of this, the length of a mortgage can seem like an eternity to some people. If you are in your 30's, a thirty-year mortgage is daunting, particularly if you assume that you will make your final payment sometime around retirement age. This is not a particularly appealing prospect for some people, so they look for ways to pay off their mortgage earlier. Here are a few ways to accomplish that goal.

SIMPLY PAY MORE PRINCIPLE

Most people can figure this concept out on their own but some do not realize how much actual financial impact paying more principle can make. For example, paying another $50 per month may take six months to year off the back end of the loan, depending on the total amount of the loan. Increasing the payment as your income increases is a way to cut years off of the loan. For many people this boils down to choices, and decided whether they are really serious about paying off the mortgage early. Are you willing to give up one weekend out in exchange for putting another $50-$100 towards your mortgage each month?

REFINANCE TO A SHORTER LOAN

Loans come in a variety of lengths and rates. One way to cut down on the length of a mortgage loan is to refinance with a shorter-term loan. Many people start with a 30-year loan but find after a few years that a 15-year loan may be feasible. A 15-year loan typically means a larger payment, but it can also mean a lower percentage rate, which an offset the higher payment. Adjustable rate mortgages can be tempting in the short-term, but market volatility can make them a risky venture and difficult to forecast in terms of paying down mortgages early.

GET A CREDIT CARD THAT PAYS TOWARD YOUR PRINCIPLE

Many credit cards have reward programs in the form of cash, statement credits, travel, or merchandise. Some loan companies are now offering their own credit cards that pay rewards directly towards the principle of the loan. While you can use the rewards of a different card and simply pay more cash towards your loan, it often helps to have a built-in incentive that is designed for a specific purpose. This the same reason that people sometimes set up automatic payments because they know they need structure in order to form habits.

Paying down a loan in fewer years can be as simple as paying more money, but it should be done with knowledge of the financial impact. Also, people should continue to research other loan options and incentive programs. With the economy in flux and interest rates changing from week to week, it may be beneficial to refinance. The key is research and market awareness in order to take advantage of opportunities as they become available.

Learn more about this author, Todd Pheifer.
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