How to Pay Off Your Mortgage Early

If you want to know how to pay off your mortgage early, you may have more options than you think. Even a small extra payment each month can help lower your mortgage balance. Over time, it may also reduce the amount of interest you pay.

For most homeowners, the mortgage is their biggest monthly bill.

So, it’s natural to wonder:

“Can I pay off my house sooner without putting too much pressure on my monthly budget?”

In many cases, you can.

However, paying off your mortgage early isn’t the right choice for everyone. You still need money for emergencies, retirement and other goals.

Here are some simple ways to get started.

1. Pay off your mortgage early with extra principal payments

One of the easiest ways to pay off your mortgage faster is to pay a little extra each month.

Let’s say your regular principal and interest payment is $1,450. You might decide to pay $1,550 instead.

That extra $100 can go toward your mortgage principal.

Over time, those extra payments lower your balance. As a result, you may pay less interest and own your home free and clear sooner.

Before you do this, call your mortgage company. Ask how to make sure the extra money goes toward principal.

That part is important.

2. Make one extra mortgage payment each year

Another way to pay off your mortgage early is to make one extra payment each year.

However, you don’t have to make the whole payment at once.

Instead, divide one monthly principal and interest payment by 12. Then add that amount to your regular monthly payment.

For example, let’s say your principal and interest payment is $1,200.

Divide $1,200 by 12. That gives you $100.

Therefore, you could add $100 to your payment each month.

Over one year, that adds up to an extra $1,200. Make sure your mortgage company applies that extra money to principal.

3. Look at biweekly mortgage payments

You may have heard about making a mortgage payment every two weeks.

Here’s how it works.

Instead of making one full payment each month, you make half a payment every two weeks.

There are 52 weeks in a year. Therefore, you make 26 half-payments.

That equals 13 full payments instead of 12.

In effect, you make one extra mortgage payment each year.

However, check with your mortgage company first. Some companies handle partial payments differently. Also, some outside companies charge fees to set up biweekly payments.

You may not need to pay someone to do this for you.

4. Use extra money to reduce your mortgage

Did you get a tax refund?

Maybe you received a work bonus or other extra money.

You could put part of that money toward your mortgage principal.

However, you don’t have to use all of it.

For example, you could put some in savings. You could enjoy some of it, too. Then you could use the rest to lower your mortgage balance.

Even one extra principal payment can help.

5. Keep money for emergencies

Paying off your mortgage faster can feel great.

However, don’t put every extra dollar into your house.

Homes need repairs.

Furnaces quit. Roofs leak. Refrigerators stop working. Water heaters seem to know exactly when you don’t want another bill.

Therefore, keep some money in savings.

Also, look at your other debts. For example, you may have credit card debt with a much higher interest rate than your mortgage.

Your mortgage is important. Still, it’s only one part of your financial life.

If you recently bought your first home, you may also want to read my Buying Your First Home? Here’s What I’d Do First article. [INTERNAL LINK: Link this text to your first-time homebuyer article.]

6. Think carefully before refinancing your mortgage

Some homeowners refinance a 30-year mortgage into a 15-year mortgage.

That can help you pay off your mortgage faster.

However, refinancing costs money.

You may have closing costs. Your interest rate may also change. Plus, a 15-year loan usually has a higher required monthly payment.

There is another option.

You may be able to keep your current mortgage and simply pay extra toward the principal.

That gives you more freedom. If money gets tight one month, you can stop making the extra payment.

Before refinancing, compare the costs and possible savings.

The Consumer Financial Protection Bureau also provides information that can help homeowners understand mortgages, loan payments and refinancing. [OUTBOUND LINK: Link “Consumer Financial Protection Bureau” to its official mortgage information.]

7. Check for a prepayment penalty

Before making a large extra payment, check your mortgage paperwork.

You can also call your mortgage company.

Ask:

“Is there a penalty for paying my mortgage off early?”

Also, ask about any rules for extra principal payments.

Many mortgages allow extra payments. Still, it’s smart to check first.

The Consumer Financial Protection Bureau explains how prepayment penalties work and when they may apply. [OUTBOUND LINK: Link this sentence to the CFPB’s official prepayment penalty information.]

How much can you save by paying off your mortgage early?

The answer depends on your mortgage.

Your interest rate matters. So does your loan balance. The number of years left on your mortgage makes a difference, too.

The amount you pay extra also matters.

Try looking at several choices.

What happens if you pay an extra $50 a month?

What about $100?

What about $200?

A mortgage payoff calculator can help you see the difference.

For another useful resource, the Freddie Mac website provides educational information about mortgages and homeownership. [OUTBOUND LINK: Link “Freddie Mac” to its official homeownership resources.]

Should you pay off your mortgage early?

There is no single answer for everyone.

For some homeowners, becoming mortgage-free is very important.

This may be especially true as retirement gets closer. Having no mortgage payment can lower your monthly expenses.

However, another homeowner may need to build savings first.

Someone else may want to pay down higher-interest debt. Another person may need to save more for retirement.

Therefore, look at your whole financial picture.

If you are thinking about selling your current home or moving to something smaller, you may also want to visit my Downsizing & Moving information. [INTERNAL LINK: Link this text to your downsizing page or a downsizing article.]

If you’re unsure about the financial choice, talk with a qualified financial or tax professional.

Start small and pay your mortgage off faster

You don’t need to make a big change today to pay your mortgage off faster.

Start by looking at your mortgage statement.

Find three things:

Your current balance, your interest rate and the number of years left on your loan.

Next, ask yourself a simple question:

“How much extra could I comfortably pay each month?”

Maybe it’s $50.

Maybe it’s $100.

That’s okay.

The goal isn’t to pay off your house faster than someone else.

Instead, the goal is to make choices that put you and your family in a better financial position.

Paying off your mortgage early may start with something as simple as one small extra payment.

Mark Eastman
Eastman Team Real Estate
Heritage 1st Realty

Helping you see the bigger picture in real estate.

This article is for general education. It is not personal financial, tax or legal advice. Mortgage terms and financial situations are different for every homeowner.