Buying A Home Home Loans

4 (Almost) Painless Ways to Pay Off Your Mortgage Faster

Just because you took out a 30-year loan to buy a home doesn’t mean it has to take decades to pay off your mortgage.

Dumping your mortgage sooner instead of later can free up a nice chunk of change in your budget, not to mention the peace of mind that goes along with owning your home free and clear. Unless an unexpected windfall is in your future, you’ll have to come up with a plan for attacking the debt and pay off your mortgage.

Whether you owe $50,000 or $500,000, here are some tips for eliminating that pesky home loan in less time and pay off your mortgage:

Switch up your payment schedule

If you’re still paying your mortgage once a month, making the switch to biweekly payments instead is a pretty easy way to knock down the balance faster.

It’s just a matter of simple math: there are 52 weeks in a year, which equals 26 half-payments. Divide that by two and you get 13, which equals 12 regular payments plus one extra. That one payment may not seem like much but you’ll be surprised at the impact it can have.

Here’s an example of how going the biweekly route can save you both time and money to pay off your mortgage. Aassume you buy a home for $165,000 with an interest rate of 4.5%. Your monthly payment is $836, which adds up to a little over $10,000 you’re paying each year.

Over the life of the loan, you’ll shell out around $135,000 in interest alone. By tacking on that one extra payment, you accelerate your payoff by four years and shave about $22,000 off the interest.

Take advantage of extra cash to pay off your mortgage

Making lump sump payments to the principal is another good option to pay off your mortgage early, especially if you’re able to do so without taking the money out of your regular budget.

Let’s say you get a bonus check from work or a few thousand dollars back on your tax refund. Normally, you might be tempted to blow the extra cash, but applying it to your mortgage is the smarter move if you’re really committed to getting rid of it.

Let’s reconsider the example we gave earlier. If you were to make a one-time lump sum payment of $5,000 without switching to a biweekly system, you’d still knock two years off the mortgage term and reduce the total amount of interest paid to $122,000.

When you look at it that way, parting with money you may not have been expecting anyway doesn’t seem like such a bad deal.

Round up to pay off your mortgage faster

Obviously, paying more toward the principal each month is a no-brainer but not everyone’s budget will allow them to fork over hundreds of additional dollars on a regular basis.

If you want to chip in something extra to help pay off your mortgage faster but you don’t have a lot of wiggle room, rounding up your payments is a small way to make a big difference. Even if it’s just as little as $5 or $10 a month, those little bits can really add up to a nice dent in your total mortgage debt.

Consider a refinance

When you want to step up your mortgage payoff game even more, refinancing may be the way to go. Switching to a 10, 15 or 20 year term gives you a much shorter timeline for reaching your debt-free goal and it can save you a substantial amount of money to boot.

The trade-off is that the shorter the mortgage term, the higher the monthly payments will be so you need to consider your entire financial situation as a whole before making the leap to pay off your mortgage faster through refinancing..

If you don’t want to be locked in, you can just figure out what your payments would be if you did refinance and pay that amount each month. You won’t get the added advantage of a lower interest rate but you’ll still be making progress ahead of schedule and you’ve got the flexibility of dropping the payment back down if your income changes or an unexpected expense pops up.

Don’t forget about penalties

Before you start throwing huge wads of cash at your mortgage, be sure to check with your lender to make sure you won’t get hit with a prepayment penalty if you pay off your mortgage early.

Whether you’re subject to a penalty really depends on the type of loan you have and your lender’s policy so you need to be clear on what the rules are beforehand. Otherwise, all your efforts to drop your mortgage debt faster could actually end up costing you money.

About the author

Rebecca Lake

Rebecca Lake is a personal finance writer and blogger specializing in topics related to mortgages, retirement and business credit. Her work has appeared in a variety of outlets around the web, including Smart Asset and Money Crashers. You can find her on Twitter at @seemomwrite or her website,

1 Comment

  • My credit score is 647 and my wife is 680. Our combine income is 127,000 dollars and we can’t qualify for a conventional loan. Why?

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