Paying off your mortgage early can save you thousands in interest and provide financial freedom. Whether you want to reduce monthly expenses or build home equity faster, there are several strategies to help you achieve your goal. Here are some of the best ideas to pay off your mortgage sooner.
1. Make Biweekly Payments
Instead of making one monthly payment, switch to biweekly mortgage payments. This method allows you to make one extra payment per year, reducing interest costs and shortening your loan term.
How It Works:
- Divide your monthly payment in half and pay every two weeks.
- Over the course of a year, this results in 26 half-payments, or 13 full payments instead of 12.
- This extra payment reduces the loan principal, lowering interest over time.
2. Round Up Your Payments
Rounding up your mortgage payment to the nearest $100 or $500 can make a big impact over the years.
Example:
- If your monthly mortgage is $1,450, round it up to $1,500.
- The extra $50 per month can significantly reduce your loan term and total interest.
3. Make Extra Payments Toward Principal
Whenever possible, make lump-sum payments directly toward your principal balance.
Best Times to Apply Extra Payments:
- Tax refunds
- Work bonuses
- Inheritance or windfalls
Even occasional extra payments can help you shave years off your mortgage.
4. Refinance to a Shorter Loan Term
If you have a 30-year mortgage, refinancing to a 15-year mortgage can help you pay off your home faster.
Benefits of a Shorter Loan Term:
- Lower interest rates (compared to 30-year loans)
- Faster equity buildup
- Significant savings on interest
While monthly payments will be higher, you’ll own your home much sooner.
5. Refinance for a Lower Interest Rate
If rates have dropped, refinancing your mortgage can help you:
- Lower your monthly payment
- Apply savings toward the principal
- Reduce overall loan costs
Use a mortgage calculator to compare savings before refinancing.
6. Apply Extra Income to Your Mortgage
Whenever you receive unexpected income, such as:
- Work raises
- Side hustle income
- Investment profits
Apply it directly to your mortgage principal instead of spending it.
7. Avoid Unnecessary Spending and Redirect Savings
Cutting back on non-essential expenses can free up cash for extra mortgage payments.
Examples:
- Cancel unused subscriptions
- Eat out less frequently
- Reduce impulse purchases
Redirect these savings to pay down your mortgage faster.
8. Make One Additional Payment Each Year
If biweekly payments aren’t an option, consider making one extra full payment per year.
- This can shorten a 30-year loan by several years.
- You can split this payment across 12 months to make it more manageable.
9. Use a Mortgage Recast
A mortgage recast allows you to make a large lump sum payment toward the principal and then reduce future monthly payments while keeping the original loan terms.
Benefits:
- Keeps your existing interest rate.
- Reduces required monthly payments.
- Helps you pay off your mortgage faster while maintaining flexibility.
Not all lenders offer recasting, so check with your mortgage provider.
10. Avoid Taking Out Home Equity Loans
Using home equity for loans or credit lines increases your debt and delays mortgage payoff. If possible, avoid:
- HELOCs (Home Equity Lines of Credit)
- Cash-out refinancing
Final Thoughts
Paying off your mortgage early requires discipline and strategy. Whether you make biweekly payments, round up your payments, or apply extra income toward the principal, every little bit helps reduce interest and shorten your loan term. Choose a method that works best for your financial situation and watch your home loan disappear faster!
