Looking to pay off your house? It turns out there are plenty of ways to pay off your mortgage faster!
Doing so can often cut YEARS off your mortgage and save you thousands of dollars in interest.
So who wouldn’t want to save a bundle by paying it off a whole lot faster?
(Tip: Check with your lender to make sure there are no prepayment penalties before you start. Those penalties aren’t as common now, but it’s still smart to check.)
If the idea of owning your home free & clear is for you, check out these 10 smart ways to pay off your mortgage faster.
10 Ways to Pay Off Your Mortgage Faster
You can use as many of these methods as you like to get your house paid off faster. But do consider using at least one of them. Every little bit helps!
1. Pay Even a Little Bit Extra Each Month
This is probably the easiest way to do it. Send in a little bit extra each month when you make your normal mortgage payment.
How much extra? Whatever you like. You can round up, pick a set extra sum that works for you each month, or change it up.
(We started out by sending an extra $35 per month. Here’s the whole story of how we paid off our mortgage early.)
Talk with your lender about the best way to send in extra. Some will let you login and direct a payment, some may ask you to call and do it over the phone, etc. You will likely have to make two payments: your regular amount and the extra.
Whatever you choose, the important part is to make sure to tell them that the extra should go to principal only.
2. Make One Extra Payment a Year
You can do this on your own by sending in a full extra payment marked “principal only” once a year. Again, call your lender to find out the best way to make that payment.
Or if your lender offers a biweekly payments program, you can sign up for that. (It may also be called an accelerated payments program.) Then you’ll automatically make one extra payment a year. Be aware of any fees they may charge if you go with a lender-run program.
Biweekly payments are when you make half your monthly payment every two weeks. You pay half 26 times a year instead of the whole amount 12 times a year. So twice a year, you end up making an extra half mortgage payment to principal only. That adds up to one extra payment per year.
Biweekly payments can be handy if you get paid every two weeks but you budget monthly. People who get paid biweekly often think of it as getting an extra paycheck twice a year. In that case, tossing in an extra half payment from the “extra” check can be relatively easy.
3. Make Two Extra Mortgage Payments a Year
You can also speed things up even more by making 2 extra mortgage payments a year. For example, the typical mortgage payment on a $200,000 house would be $823 at 2.81% APR. (Not including taxes and insurance.)
Let’s see what happens during the first year alone using those numbers. If you make one extra $823 payment that year to principal only, it cuts 2 months off the mortgage.
But if you make 2 extra mortgage payments a year to principal only, it cuts four months off in the first year. Making 2 extra mortgage payments a year can speed things up quite a bit, in other words.
Depending on what your interest rate is right now, refinancing can be another great way to pay off your mortgage faster. You can:
- refinance to a lower interest rate
- refinance to a shorter term
- or refinance to both a lower interest rate and a shorter term
Refinancing to a shorter term is the easiest way to pay off your mortgage in 15 years, or 20. And if your new payments are less than your old ones, you can rev it up even more by continuing to make your old payment. (Direct the difference to principal only.)
If think you want to do this, make you know how much the refinance will cost you from various lenders. That way you can check if it’s worth it or not. Sometimes you can get a true no-cost refinance, but that doesn’t happen very often.
If your current loan is a HARP (Home Affordable Refinance Program) loan owned by Fannie Mae or Freddie Mac, you may be able to use the High LTV Refinance Program to refinance.
5. Add Your Mortgage to the End of Your Debt Snowball
If you’re using a debt snowball to pay off your consumer debts, finish those up. Then you can simply add your mortgage to the end of it. That’s pretty much what we did, and it REALLY made a difference.
Why? Because you can make huge extra payments to your mortgage once you no longer have any consumer debt. And since you’re already used to making those payments anyway, you won’t feel deprived. In fact, if you’re like us, you’ll feel excited at your progress!
6. Move to a More Affordable Home or Area
This takes some upheaval, but it can be worth it depending on your goals and situation. For example, you could downsize to a smaller, less expensive home. Or you could move to a more affordable home in a different area or state. Or both.
Your money may go a lot further in a new area. That could mean moving to the suburbs, to a new neighborhood, to a new city, or even moving to a new state.
If you’re up for moving from a high cost of living area to a low cost of living area, the price difference might be huge. You may even be able to get a bigger house for less money and be out of debt sooner.
This can be especially good if you’re able to switch to full time remote work at your current job.
7. Use Windfalls to Speed Up Repayment
If you get a windfall (such as a tax refund, bonus, gift, inheritance, or even that elusive lottery win) send it to the mortgage in a lump sum. It’s one of the most painless ways to pay off your mortgage faster. Again, make sure to tell them the lump sum should go to principal only.
8. Recast Your Mortgage
If you’ve made a big lump sum payment to principal, you may be able to recast your mortgage if your lender allows it. (And if you don’t have an FHA, VA, or USDA-backed loan.)
The lump sum usually needs to be at least $5,000, and there’s usually a fee for this. Recasting is usually cheaper than refinancing, but not always.
If you do recast your mortgage, they’ll re-amortize the loan. A recast lowers the minimum monthly payment but keeps the same interest rate and term. So it reduces the total amount of interest you’ll pay.
This can be good if your loan’s interest rate is less than mortgage rates are now.
If you do a recast, you can then add another way to pay off your mortgage faster. For example, suppose your old mortgage payment was $1400, and after the recast it’s $1200. You can send the $200 difference to principal only each month. That’ll get rid of your mortgage even faster.
9. Gradually Increase Your Extra Payment Amounts
Rather than only sending in a fixed extra amount, gradually increase your extra payment amounts over time.
For example, you might increase it by 1% every 3 months, by the amount of any salary increases, etc.
This is a nice, painless way to do it.
10. Make Paying Off Your Mortgage Your Focus
If you wake up every day thinking of ways to pay off your mortgage faster, you’ll make more progress! Really making it the priority can help a whole lot.
That usually involves things like:
- Working extra and sending the money you earn to it
- Cutting budget items and sending the difference
- Getting a roommate and sending their share to it
- Plus one or more of the ideas above
But don’t raid your emergency fund or retirement to pay it down faster. Emergency funds are for emergencies, and retirement funds are for retirement. Paying off your house isn’t either of those.
Pros and Cons to Paying Off Your Mortgage Faster
If you’ve read this far, chances are you’ve already decided to pay off your mortgage. But just in case, here are some of the pros and cons.
The main benefits to paying it off faster are:
- You spend less money on interest. Depending on what your loan is like, you could save tens of thousands of dollars.
- You get it done sooner! That frees up money to do other things. (Saving, investing, traveling — whatever you like.
- Having a paid for house is a huge relief during stressful times. It’s nice not to have to worry about making a house payment if you lose your job, for example.
- The sooner you get your mortgage paid off, the sooner the weight of all that debt lifts off your shoulders.
And the disadvantages:
- If you do actually get a tax deduction for mortgage interest, you’ll lose that if you pay it off. But most people do not. (See Why Keeping Your Mortgage for the Tax Deduction is Often a Bad Idea.)
- If you have a very low interest rate, you may prefer to try to make more money by investing than you spend in interest. But while you might make more that way, there’s no guarantee. You could lose money too. You can also both invest and use some of these ways to pay off your mortgage faster. There’s no rule that says you can’t do both.
So, what do you think? If you’re going for a faster mortgage payoff, take your pick from the ways listed above to get it done.
I recommend starting with sending in a little extra to principal with your very next payment. Then you can decide on which of the approaches will work best for you.