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8 Ways to Pay Off a Mortgage Early

Ready to pay off your mortgage? Laura explains who should pay off their mortgage ahead of schedule and who shouldn't. Learn eight ways to get rid of your home loan as quickly as possible—if it’s a smart financial move for you.

By
Laura Adams, MBA
10-minute read
Episode #443

Strategy #3: Add an extra amount each month

If you’re determined to pay down your mortgage early, every little bit will help. Instead of saving to make an additional large payment once a year, pay an extra amount each month.

Let’s say you have a $100,000, 30-year, fixed-rate mortgage at 4.5%. If you add an extra $100 to your payment each month, you’d pay it off almost 9 years earlier and save over $26,000 in interest.

Find a number that works for you, no matter if it’s an extra $10 or $1,000 per month. If you get a raise, send the net increase in your paycheck to your mortgage each month. You won’t even miss the money.

Strategy #4: Apply your windfalls

While you can pay off your mortgage in a slow, steady way by regularly paying the same amount each month, you don’t have to be consistent. There’s nothing wrong with sending one big payment when you can.  

While you can pay off your mortgage in a slow, steady way by regularly paying the same amount each month, you don’t have to be consistent. There’s nothing wrong with sending one big payment when you can.  

If you get a bonus at work, a tax refund, or an inheritance, put all of it toward your mortgage one month and then go back to your regular payments.

Strategy #5: Round up your payments

If you don’t have a lot of extra money to put towards paying off your mortgage early, you could simply round up your monthly payments.

For instance, if your payment is $970, why not just pay $1,000? Again, be sure to indicate that the extra should go toward paying down your principal balance.

Strategy #6: Set a target payoff date

If you have a specific date in mind that you want to be mortgage free—such as on your 50th birthday, when your kids are finally out of the house, or when you retire—figure out how much extra it will take.

Since the math is complicated, use a mortgage payoff calculator to crunch the numbers. Enter different amounts of extra principal payments until the final payoff date is close to your target.

Strategy #7: Refinance

One way to pay off a mortgage faster is to refinance at a lower interest rate, for a shorter term, or both. Keep an eye on rates and seriously consider refinancing if they fall at least one percent below the rate you’re currently paying.

Refinancing comes with expenses, so for it to be a good deal you need to be sure that you'll stay in your home long enough to recoup the costs. Get a refinance quote from a competitive lender like Quicken Loans.

If you refinance for a lower rate, you could continue paying your old, higher payment, sending the extra to your principal. The amount you’ll save depends on your situation, but could be thousands and it would probably shave years off your loan term.

If you refinance for a shorter term, such as 15 years, the payments will be higher, so make sure you can afford it. A shorter term significantly cuts the amount of interest you pay in addition to getting out of debt sooner—but gives you less flexibility if your financial situation changes.

To get the effect of a shorter term, without the risk, just make payments as if you had a 15-year loan. That puts you in control, not the lender. Simply use an online calculator to get the payment you’d need to make to pay off the loan in the timeframe you want.

See also: Best Mortgage Company to Shop Your Home Loan

To get the effect of a shorter term, without the risk, just make payments as if you had a 15-year loan. That puts you in control, not the lender. 

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About the Author

Laura Adams, MBA

Laura Adams received an MBA from the University of Florida. She's an award-winning personal finance author, speaker, and consumer advocate who is a frequent, trusted source for the national media. Money-Smart Solopreneur: A Personal Finance System for Freelancers, Entrepreneurs, and Side-Hustlers is her newest title. Laura's previous book, Debt-Free Blueprint: How to Get Out of Debt and Build a Financial Life You Love, was an Amazon #1 New Release. Do you have a money question? Call the Money Girl listener line at 302-364-0308. Your question could be featured on the show.