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Paying off the Mortgage

7 Easy Ways to Pay Off Your Mortgage Early

9 Minute Read

According to the Urban Institute, more than 26.9 million Americans own their home outright.(1) Some bought their homes with cash, while others whittled away at their mortgages year after year until they were gone.

Maybe you worked with a great real estate agent and got a deal on your home, but—like two-thirds of American homeowners—you had to take out a mortgage to finance the purchase.(2) You can join the ranks of debt-free homeowners and make your last mortgage payment sooner rather than later with these seven easy ways to pay off your mortgage early!

Can I Pay Off My Mortgage Early?

Each time you pay extra on your mortgage, more of each payment after that is applied to your principal balance. But, before you start making extra payments, let’s go over the ground rules.

  • Check with your mortgage company first. Some companies only accept extra payments at specific times or may charge prepayment penalties.

  • Include a note on your extra payment that you want it applied to the principal balance—not to the following month’s payment.

  • Don’t shell out your hard-earned cash for a fancy-schmancy mortgage accelerator program. You can accomplish the same goal all by yourself. High-five!

If you want to get serious about paying off your mortgage quickly, check out our mortgage payoff calculator. It will help you estimate how quickly you can pay off your home.

Biweekly Mortgage Payments

The concept of a biweekly mortgage payment is pretty simple. You make half of your mortgage payment every two weeks. That results in 26 half-payments, which equals 13 full monthly payments each year.

That extra payment can knock eight years off a 30-year mortgage, depending on the loan’s interest rate.

How to Set Up a Biweekly Mortgage Payment

  • Locate the principal and interest portion of your payment on your monthly statement and simply divide that number by two. For example, if the principal and interest portion of your payment is $1,500, your new biweekly mortgage payment is $750.

  • Don’t forget to include the tax and insurance portion of your payment each month. In this $1,500 payment example, the $750 biweekly payment only covers principal and interest. You’ll have to pay the tax and insurance portion of your payment in addition to that.

  • Find out how or if your mortgage company handles biweekly mortgage payments. Some lenders will process biweekly payments while others refuse to accept partial payments at all. In any case, do not pay a fee to initiate a biweekly mortgage plan.

  • If your lender isn’t open to biweekly payments, open a new bank account exclusively for your mortgage payment. Deposit your half-payment every two weeks and use that money to make your full mortgage payment (either by check or automatic payment) on every second deposit.

  • A biweekly payment is not a substitute for gazelle intensity. Once you reach Baby Step 5, start putting as much money as you can toward the mortgage to pay it off even faster.

How to Pay Off Your Mortgage Early

Every dollar you add to your regular payment each month puts a bigger dent in your principal balance—and you don’t have to double-down to make a difference. Adding just one extra payment each year knocks years off your mortgage!

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Here are some other options for paying extra on your mortgage and how those extra payments affect, as an example, a $220,000, 30-year mortgage with a 4% interest rate:

1. Make an Extra House Payment Each Quarter

You’ll pay your mortgage off 11 years early, and you’ll save more than $65,000 in interest.

2. Bring your Lunch into Work

Toting a brown bag to work every day won’t win you any fashion contests. But trading lunch out for eating in can make you a lean-and-mean, mortgage-free machine three years ahead of schedule. Applying your $100 a month in lunch money to your mortgage will also save you more than $28,000 in interest.

Other small sacrifices can go a long way to help pay off your mortgage early. Put Andrew Jackson to work for you by adding just $20 to your mortgage payment each month. Based on our example mortgage numbers above, you’ll pay your mortgage off a year early, saving over $7,000 in the process.

How much could you save if you took your Starbucks money and added it to your mortgage payment each month? According to the Acorns Money Matters Report, the average American spends $3 per day on their coffee.(3) That’s around $90 a month added to your mortgage payments—which will save you $25,000 in interest and four years on the life of your loan!

3. Refinance—Or Pretend You Did

The only type of debt Dave won’t yell at you about is a 15-year fixed-rate mortgage with a payment that’s no more than 25% of your take-home pay. You’ll pay much more in interest on a 30-year mortgage—and, besides, who wants to be in debt for 30 years?

You can refinance a longer-term mortgage into a 15-year loan. Or, if you already have a low interest rate, save on the closing costs of a refinance and simply pay on your 30-year mortgage like it’s a 15-year mortgage. The same goes for a 15-year mortgage. If you can swing it, why not increase your payments to pay it off in 10 years?

If you have questions about refinancing or need help with a mortgage, we recommend you contact Churchill Mortgage.

4. Downsize

Downsizing your house could be a drastic step, but if you’re set on getting rid of your mortgage, consider selling your larger home and using the profits to buy a smaller, less expensive home.

With the profits from selling your bigger house, you may be able to completely pay cash for your new home. But even if you have to get a small mortgage, you’ve succeeded in reducing your debt. Now your goal is to get rid of that debt as quickly as possible. The smaller the balance, the quicker you can make it happen.

We all know hindsight is 20/20, but if you take advantage of the following tips before you purchase your next home, you will be in a great position to pay that mortgage off early.

5. Don’t Bite Off More Than You Can Chew

Before you search for homes or find a real estate agent, it’s important to ensure you’re financially ready and can actually afford the house you want to buy. This handy checklist is a great place to start. If you can’t say yes to all six questions, it’s best to put your home purchase on hold.

  • Am I debt-free with three to six months of expenses in an emergency fund?

  • Can I make at least a 10% (preferably a 20%) down payment?

  • Do I have enough cash to cover closing costs and moving expenses?

  • Is the house payment 25% or less of my monthly take-home pay?

  • Can I afford to take out a 15-year fixed-rate loan?

  • Can I afford ongoing maintenance and utilities for this home?

If you need help figuring out how much house you can afford, our free mortgage calculator is a great place to get more information and see how much your maximum payment should be.

6. Consult a Pro to Find the Right Home

If you’re looking to buy a home that fits your budget, or if you’re ready to sell your home, consult an experienced real estate agent whose advice will save you time and money.

A buyer’s agent can help you navigate through the home-buying process. In some cases, they may even be able to help you find a house before it hits the market, giving you a competitive edge. And when it comes to making an offer, your agent will negotiate on your behalf—so that you don’t pay a penny more than you have to.

You can find a trustworthy real estate professional in your area through Dave’s nationwide Endorsed Local Provider (ELP) network. Our ELPs understand how important it is to you to buy a home you can afford, so you can trust that your ELP won’t pressure you to consider homes that would bust your budget. Contact your agent today!

7. Maximize Your Down Payment

The best way to buy a home is with 100% down. Paying cash for a home may sound weird, but imagine all the fun you could have without a mortgage payment weighing you down!

If you can’t postpone the purchase until you can pay cash, plan to put at least 10% down at the closing table. Of course, 20% is even better because then you’ll avoid paying private mortgage insurance (PMI). PMI typically costs between 0.5% and 1% of the loan amount annually. For example, on a $250,000 mortgage, PMI will cost you $1,250 to $2,500 a year.(4) Why give the bank extra money each month if it doesn’t pay your mortgage down faster?

Keep in mind that the more cash you put down on the front end, the less money you’ll need to finance. That adds up to a lower mortgage payment each month, making it easier to pay off your mortgage early.

Related: Want to learn more about how to save up a down payment on a house—and fast? Our 5-Day Home Buyer Savings Plan will help you discover simple tricks to save a five-figure down payment by this time next year!

About Chris Hogan

Chris Hogan is the #1 national best-selling author of Retire Inspired: It’s Not an Age. It’s a Financial Number and host of the Retire Inspired Podcast. A popular and dynamic speaker on the topics of personal finance, retirement and leadership, Hogan helps people across the country develop successful strategies to manage their money in both their personal lives and businesses. You can follow Hogan on Twitter and Instagram at @ChrisHogan360 and online at chrishogan360.com or facebook.com/chrishogan360.

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