Let’s face it. Even in the best of times, to pay off mortgage balances quickly has always been a challenge for many Utah residents. And while we may live in far from certain times, the opportunities for reducing mortgage costs can seem quite attractive. After all, home refinance rates are at a historic low, with many analysts predicting a continued drop well into 2021.
At least for those who are eligible.
We’ve discussed just why home loan refinancing may not be the best course of action for you if you’re looking to pay off your mortgage early before. While low interest rates have their own particular advantages, your circumstances will define your eligibility. But what if I told you you could pay off your mortgage in 11 years or even less without refinancing your home loan?
It might sound too good to be true. But there are some fairly creative ways that you may not have considered before. Let’s review some of the ways in which you can pay off your mortgage fast without even having to move.
Use a Low Rate HELOC To Pay Off Mortgage
Home equity lines of credit or HELOCs are becoming an increasingly attractive option for homeowners looking for an alternative to refinancing; not least of which is due to extremely competitive interest rates. And while there are pros and cons to a HELOC, if you can budget shrewdly you just might find a way to pay off your mortgage much earlier using one than you may have even thought possible.
A HELOC is essentially a line of credit given by a lender for a specific amount over a specific time period based on the equity in your home. It’s tempting to think of it as a type of credit card because that’s essentially what it is. But unlike a traditional credit card, your house serves as collateral.
But where people frequently run into a problem with HELOCs is when they’re actually used as a credit card to make non-home related purchases. Obviously, this creates an increasing amount of debt which in many cases puts homeowners at the risk of foreclosure.
What many people don’t know is that the specific amount in your HELOC can actually be increased by directly depositing funds into the account. This can be done from any source; outside investments, an existing savings account or even your monthly earnings. Why is this an advantage?
- It gives you a greater amount of monthly funds to draw from, allowing you to pay off your mortgage early.
- The flexibility can allow you to structure your monthly mortgage payments to take advantage of much lower interest rates.
- It enables you to pay down the balance on your HELOC early while ensuring you never have to worry about making a monthly payment.
- It teaches you just how to budget your finances much more effectively.
This isn’t an option for everyone. For one, your lender has to approve it and have a HELOC structure that can accept direct deposit via ACH. Unfortunately, not every bank will. For another, you’d need to have a stable enough source of outside income to ensure monthly deposits could be consistently made. But if you fall into either of those categories, you might find it to be a relatively easy solution to paying off your mortgage early.
Consider a Leaseback Mortgage
The chief disadvantage in applying for a HELOC is that your credit is still under the same scrutiny as applying for home refinancing. In Utah, the average credit score was estimated as being 716 in 2019. And that could certainly be considered an above average credit score—under normal circumstances.
But many banks are actually increasing the minimum credit score when evaluating eligibility for any sort of loan. And with more and more Americans finding their credit ratings declining due in part to uncertain economic times, it shouldn’t come as any huge surprise that applications for a HELOC can sometimes be rejected due to bad credit.
One solution to pay off mortgage balances early is that sometimes what gets overlooked is what’s known as a leaseback mortgage. In a leaseback mortgage, a third party secures refinancing for you and allows you to lease the loan through monthly installments, just like a HELOC. While some homeowners may have a trusted family member or associate who will agree to a leaseback mortgage, there are a few providers who specialize in securing refinanced loans.
If it sounds similar to a landlord/tenant agreement, you wouldn’t be too far off. Except you’re still liable for actually paying your monthly mortgage. Simply at a much more attractive rate.
But just like a landlord/tenant agreement, leaseback mortgages also come with their own particular disadvantages.
- Lenders aren’t always particularly eager to agree to a leaseback mortgage when applying for any form of refinancing. And many will also insist on scrutinizing your financial and employment history during the application.
- While legitimate third party leaseback mortgage providers are out there, there’s also a long history of third party scams. Finding a trustworthy provider takes a fair amount of time and research, and it’s not always as simple as ensuring they’re registered with the Better Business Bureau.
- The interest rates charged by a third party provider can frequently match even your current interest rates. The easiest solution would be to find a trusted friend or family member to act as a co-signer, but this may not always be a realistic option for you.
Or Just Pay Off Your Mortgage Without Moving
You might think selling your home to a real estate investor or home buying company means a final sale. But this isn’t always the case.
There are home buying companies who can offer to purchase your home and provide you with enough funds to pay off a substantial amount of your existing mortgage balance without having to leave your home. More importantly, you’ll even have the option of repurchasing your home after your final payment. And we’ve been helping hundreds of Utah homeowners do exactly that at Gary Buys Houses since 2009. It’s called our “Sell Now Move Later” program. We’ll make a cash offer for your home at a reasonable price in as little as 3 – 5 business days, no matter what the condition is. There’s no obligation and no pressure to commit. Best of all, we’ll provide you with an immediate source of funds to pay off your mortgage without having to move.
Now more than ever, learning to pay off your mortgage early might seem like an uphill battle. But it doesn’t have to be. Creative solutions are all around you if you know where to look.And despite a future that may seem uncertain, the need for even greater solutions will be on the rise. Just make certain you find the one that’s right for you.