Pay Off Mortgage Early — Faster Than You Might Think

Do you dream of the day you’ll own your home free and clear? I do. It seems like “pay off mortgage early” is getting to be a more common goal, too. (At least it’s not unheard of so much anymore.) And there are plenty of ways you can pay off your mortgage early — maybe even faster than you’d thought possible. Here’s how.

Check your interest rate

Rates are still very low right now, so it may make sense to refinance to a lower rate. Don’t just check the major banks either — online banks like ING and credit unions often have very low rates. (For example, we got a great rate with no closing costs a few years back through Pentagon Federal Credit Union.) Just make sure there are no prepayment penalties involved, either on your existing mortgage or the new one.

Consider a shorter term

While a 30 year mortgage is pretty typical, you can choose a 20 or 15 year one instead to speed things up. Although your monthly payments will be a little higher than they would be with a 30 year loan, they’re usually not that much higher. If you refinance to both a shorter term (compared to how long you currently have left to pay) and a lower interest rate, you’ll really speed things up.

Pay extra on a regular basis

Sending even a little bit extra each month toward principal will reduce the amount of interest you’ll pay over the life of your mortgage, and it’ll cut time off your loan. It’s tempting to get a 30 year loan with the intention of paying it off in 15 or 20 years by making the larger payments. At least, that’s one method I tried in the past. But I noticed that with that method, something always came up, and I never ended up making the larger payment.

If the idea is to pay extra, why not just lock in the extra amount and shorter time period? Of course, you can also eliminate the temptation to skip the extra amount by having the extra amount automatically paid to principal each month. Many lenders will allow you to set up automatic payments that include an extra amount.

Pay extra on an irregular basis

Even if you just send in extra amounts here and there, you can cut a significant amount of time and interest off your mortgage. You can do this painlessly sending bonuses, unexpected income, tax refunds, and raises to the mortgage.

Don’t move, and don’t refinance to “take out equity”

Somehow it’s also become the norm to “move up in house” — even if you wouldn’t otherwise have a need to move (such as for a job change). Even if your family size increases, you probably don’t really need to move. It may be nice to have a larger house, but it’s going to be a whole lot nicer to have a paid forhouse.

And while refinancing to “take out equity” isn’t as common anymore — mainly because not as many people actually have equity in their homes — it can still be a temptation. But moving and taking out equity do the exact opposite of what it takes to pay off your mortgage faster.

Work extra and cut expenses

When you’ve got an audacious goal like “pay off mortgage early”, one sure way to get there is to commit to doing so, and then to work like crazy. Work extra and cut expenses to generate extra cash to send to the mortgage — as often as you can. That’s the method we’re using, and it’s making a HUGE difference.

Add your mortgage to your debt snowball

If you’re paying off other debts too, you can add your mortgage to your snowball. Typically your house will be the last item in your snowball (since the debts are usually listed from lowest balance to highest balance, and mortgages are usually pretty big). But once you get to the mortgage, you’ll have all the money you had been sending to your other debts to apply to your mortgage each month, and it’ll make big dent quickly.

Avoid scams

When you’re looking to pay off your mortgage and stay out, you’ll may come across “methods” that sound too good to be true. You know what they say about things that sound too good to be true, right? They usually are.

The best way to pay off your mortgage early is to keep right on sending as much money as you can to it, not to use complicated schemes that will end up costing you money you could have applied to your debt instead.

Avoid fees

Your mortgage holder may send you an offer that lets you make biweekly payments. Biweekly payments are a good way to reduce the balance on your mortgage faster, because you’re essentially making one extra payment a year. However, if there’s a fee involved in doing so, just make that extra payment manually yourself instead. You could even send what you would have paid in fees to the mortgage to speed things up still further.



  • Some very good points here Jackie! Here’s one thing I learnt that goes along with ‘avoid fees’: always check if there is a prepayment penalty.

    I can’t believe some companies do this!

  • Great advices here. I think the biggest one is to take out 15 years mortgage if you can afford it. Our first mortgage was a 15 years and it’s not paid off yet, but 75% of the monthly payment goes toward principle now. It feels unbelievably great with just that.

  • Just out of curiosity, what are some reasons why people choose a 15 or 20 year mortgage plan rather than the regular 30 year plan?

    • As far as I know the main reasons are to have the mortgage paid off earlier, and to save an enormous amount of money that would have otherwise gone to interest.

  • We took our 15 year mortgage because it was a 5.375% interest rate instead of the 6% interest rate of a 30 year loan. That by itself would have saved us thousands. We also have overpaid since Day 1 so we could pay off our house in 10 years or less. We are on track so far but I like the idea of paying it off by the end of 2011 instead, lol.

    How are you planning on doing that Jackie since we had the same general amount left a couple of months ago (mine is at about $68,000 right now)? Are you putting one whole salary to the mortgage alone?

  • PTL777

    If you make a payment in Dec for the Jan mortgage payment
    does that cut the interest on your mortgage?
    not just for taxes,since when low income,can not deduct interest.

  • linda

    Our mortgage is getting near the end of its life but instead of paying off the mortgage we are keeping it and putting that extra money towards our traveling goals.
    The cost of the interest for the mortgage is next to nothing because the mortgage is front loaded. Just check out an amortization schedule.
    You have paid the mortgage down and that is great but with the uncertainty of economic times you might be better off to keep extra revenues to be ready for opportunities as they arise. You have to do what is comfortable for you.
    Keep up the good work.

    • Oh, we are doing other things too. We each have emergency funds that could last anywhere from 1-2 years depending on how much we cut our spending, take trips each year, and are contributing regularly to retirement. I think I will just feel better with a paid-for house. Although I do keep being tempted by some of the incredibly inexpensive condos in the area.