8 Ways to Improve Your Mortgage Situation

If you're a recent home buyer, a future one, or already a homeowner, you may be looking for ways to pay off your mortgage quicker, especially with everything that's going on with interest rates right now. How do you get started? These actionable strategies may be useful. They may seem like common sense, but it's all about having presence of mind when it comes to making payments.

Here are 8 strategies that may help with your mortgage, whether you have one or are preparing for one in the future:

1. Extra principal payments: In addition to your regular monthly mortgage payments, many loans will allow you to pay off some of the principal of your loan earlier by exceeding the expected amount in a given month. For example, if your first mortgage payment is $1,000, perhaps only a few hundred of that will be applied towards paying down the principal of your loan. The majority will go to interest. However, if you were to make a payment of $2,000 despite only owing half that much, the remainder could be applied directly to your principal.
2. Bi-weekly payments: This is similar to the step above. If your lender allows bi-weekly payments, it can reduce your total interest in the long run because you’re able to pay it off faster.
3. Never take out a high mortgage loan: Stick to this rule of thumb when it comes to shopping for a mortgage: your mortgage payment should be no more than 28% of your monthly income. We all love grand properties, but if the amount of zeros on your payment makes you uncomfortable, it’s better to walk away. Stay focused on finding a home or investment property you can afford and one that doesn't crush your wallet.
4. Use the property for business: Amazingly, with the innovations of companies like Airbnb or Vrbo, you can find short-term renters much easier than in the past. Alongside regular tenants, using your property as a side gig brings in more income. This can be put directly towards your mortgage.
5. Make the mortgage your highest interest debt: Interest is a silent killer, and if you already have high interest with current debts, knock those debts out before getting a mortgage. Interest on things such as your credit cards will hinder you, and high interest is usually an indication of a credit score that could be improved. Typically, mortgages have interest that is already low, around 3-4%. If that's your highest interest, your stress levels should be relatively low.
6. Get that 20% down payment or equity: If you've read my past article on the 12 steps of homebuying, you know about the troublesome Private Mortgage Insurance (PMI). PMI is tacked on to a mortgage when a homebuyer doesn't have the standard 20% down payment. It is only removed when the owner gains 20% equity after making continuous payments. The quicker you get to that magical 20% equity, the better. Similarly, try and save that 20% to begin with, until you can afford that as a downpayment. This will avoid any sort of PMI.
7. Don't be tricked into refinancing when a lender offers it: As someone who has worked with a big bank, I have seen people refinance that did not need it. This may seem counter-intuitive, but the first few years of your loan are typically the most costly, so it may not be in your best interest to constantly refinance your home in hopes of locking in the best possible rate. In those early years, your payments go mostly to interest as opposed to the latter years of a mortgage where your payments are applied to the principal. If you happen to be offered a refinancing offer, first talk to a professional(s) to see if it makes sense for you. Remember, banks profit off refinances. Evaluate where you are currently in the amortization schedule of the mortgage before making a final purchasing decision.
8. Get investors: This has been the key to my success in real estate. No one can do anything in this world alone. Getting a coalition of friends or associates to buy into a property can make your life easier, whether it’s by attaining, paying off, or gathering multiple properties. You will fund the property together, get tenants who pay your mortgage, and hopefully you have extra profits that can be invested in other properties. This therefore creates a steady stream of income for you and your associates.

Hopefully, by implementing some or all of these strategies, you can progress towards multiple properties in whatever style of real estate you are involved with. Remember, a house is one of the biggest purchases we make in a lifetime. Try to make it one of the most meaningful, as well.