4 Methods for Paying Off the Mortgage Early

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With interest rates at a 50-year low and financial uncertainty in the air, homeowners are searching for ways to become mortgage-free and financially independent. With these 4 methods for paying off the mortgage early, you can secure your homeownership future!

There are many different strategies for paying off the mortgage early. Some methods allow you to setup an automated pay schedule. Others require you to put time into managing and paying down manually. Some can have you paying off your mortgage in just a handful of years, others 15-20 years.

Whichever you prefer, one of these 4 methods is sure to work for you and help you pay off your mortgage early!

Here Are 4 Methods For Paying Off The Mortgage Early

1. Make one extra payment per year toward principal to pay off the mortgage early

Making just one extra payment toward the principal of your mortgage loan per year reduces the overall life of your loan. It can also save you thousands of dollars in interest! This is by far the easiest way for paying off the mortgage early, especially if you are already on a thin budget.

The average mortgage payment on a 15-year fixed mortgage in America is $1,751, while the average mortgage payment on a 30-year fixed mortgage is $1,275.

With this method, you’d take the amount of your mortgage payment (i.e. $1,751, $1275, etc) and make an extra payment toward the principal in that amount.

That means that if you saved $106 per month for 12 months, you would have an extra mortgage payment for a 15-year fixed mortgage. If you saved $146 for 12 months, you would have an extra mortgage payment for a  30-year fixed mortgage.

If you’re going to go this route for paying off the mortgage early, consider starting at the beginning of the life of your loan. Since interest is determined by the overall amount you owe, by reducing the principal with your extra payment per year, your interest is reduced as well. What does this mean? You save money, honey!

Related reading: The Complete Guide to Sinking Funds

There are three ways to do this:

  1. Create a sinking fund for your mortgage payment. You do this by dividing your monthly mortgage payment by 12 and saving that amount each month. Start this sinking fund in January. By December, you can easily make an extra mortgage payment that goes directly to the principal of your loan.
  2. Pay the additional amount on top of your monthly mortgage payment throughout the year. By the end of the year, the additional amount you’ll have paid will be equivalent to an extra mortgage payment.
  3. Pay using a lump sum — Think a work bonus, holiday bonus, or tax refund.

Before you make an extra payment for paying off your mortgage early, call your mortgage lender.

Make sure they won’t charge you for making additional payments. I know it seems crazy, but some mortgage lenders actually charge a penalty for paying off your loan early.

You will also want to double-check that your extra payment is going to the principal of your loan and not the interest.

2. Refinance to pay off the mortgage early

A common way that homeowners pay off their mortgage faster is by refinancing their homes from a 30-year fixed mortgage to a 15-year fixed mortgage. 

This is an especially good move towards paying off the mortgage early if interest rates take a drastic dip. By refinancing your mortgage, you decrease the monthly payment toward interest, therefore more goes towards the principal of your loan.

Refinancing is basically taking out a new mortgage on your home with different rates and/or terms. If your credit score has increased, if you’re making more money, and if the markets allow for a lower interest rate — refinancing could save you a ton of money. 

The biggest downsides to refinancing is that you get hit with fees, just as you did when you initially took out your mortgage. The average cost to refinance your loan is around $5,000. Think of such costs as: 

  • Government recording costs
  • Lender origination fees
  • Survey fees
  • Appraisal fees
  • Attorney fees
  • Title services
  • Credit report fees
  • Underwriting fees

Here is a great tool to calculate if refinancing your mortgage will be beneficial for paying off the mortgage early. 

If you take this route, your mortgage will be paid off in 15 years instead of 30 years with almost no effort on your part! All you have to do is pay your mortgage every month (a slightly higher monthly payment than the 30 year mortgage), and by year 15 you’ll be mortgage-free.

3. Switch to biweekly mortgage payments to pay off the mortgage early

While mortgage payments, like most bills, are paid monthly, you can opt to pay your mortgage biweekly. The frequency of payments decreases the interest that builds up, so you’ll pay less interest over time! This is a great option if you are paid biweekly and want to spread out the burden of your mortgage.

Instead of making 12 mortgage payments per year, you would make 26 mortgage payments. That means that you would essentially make an extra mortgage payment every year as well, which also helps you pay off the mortgage earlier. 

Making one extra payment per year toward principal will decrease the overall life of your loan and it will save you thousands of dollars on interest throughout the life of your loan.

4. Use the Debt Snowball Method to pay off the mortgage early

The Debt Snowball Method is by far the most popular technique to pay off debt, and has the potential to accelerate the rate for paying off the mortgage early.

Start by listing out all of your debts and ordering those debts by balance from smallest to largest. Don’t worry about the interest rate or monthly payment. When you use the Debt Snowball Method, you only focus on the balance of each loan.

Once you have your list, you will begin attacking the smallest debt first. You do this by putting all of your “leftover” money from your Zero-Based Budget on your smallest debt. For example:

  1. Car Loan – $12,786.30
  2. Student Loan – $17,893.53
  3. Mortgage – $127,890.54

In this case, I would use all of my “leftover” money from my Zero-Based Budget to pay off my car loan first. Then, once that car loan is paid off, I would use the “leftover” money from my Zero-Based Budget plus the money I was paying per month on the car loan to pay off my student loans next. 

The money you have after paying off each debt builds until you eventually put all of your power that you were using towards each minimum payment on to the last loan. 

Ready to know when you’ll be debt-free? Check out the Easy Budget Debt Snowball Calculator

Ready to know when you’ll be mortgage-free? Check out the Easy Budget Mortgage Payoff Calculator

Before you start using the Debt Snowball Method to pay off your mortgage early, make sure that you have a fully funded emergency fund and that you have no consumer or student loan debt.

By using the Debt Snowball Method on the mortgage, you’re paying off the mortgage as quickly as you can. The Debt Snowball Method has the potential to decrease the life of your mortgage loan by decades. It can save you hundreds of thousands of dollars in interest! 

Paying off the mortgage early doesn’t have to be rocket science. Try using one, or a combination of these methods to achieve mortgage freedom today!

What method would work best for you to pay off your mortgage early? Let me know!

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About the Author

Welcome! My name is Merilee and I’m the creator of Easy Budget. I started this blog to help other families like mine crush debt, budget, manage money, and meal plan like pros!

Everything you find here will be useful, motivating, and always easy. Need to contact me directly? Reach me here!

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