5 Strategies for Paying Your Mortgage Off Early

5 Strategies for Paying Your Mortgage Off Early

March 4th, 2020 | Refinancing a Home

Whether you want to save on interest payments, avoid debt in retirement or just feel the thrill of complete ownership, there are plenty of reasons to pay off your mortgage loan early. Yet because a house is typically the largest purchase most Americans make, an early pay-off may seem impossible. Instead of choking on that enormous goal, here are five bite-size strategies to help you succeed little by little.

  1. Make One Extra Payment Per year
    If you can make 13 payments a year instead of 12 you can shorten your mortgage by years. You could consider putting your entire tax refund or any annual bonuses you get toward your mortgage. If you’re serious about paying down your loan, you might also use birthday or holiday money. If its money you didn’t already set aside for something, then you will not feel the loss of it when you add it your mortgage, but you will definitely feel the benefit when your loan ends several years early.
  2. Make Bi-weekly Payments
    Some people like a more disciplined schedule to keep them on track. Rather than make a mortgage payment once a month, you could pay every other week. Because there are more than four weeks in some months, you will end up paying the equivalent of 13 monthly payments. Some banks and lenders will let you set up automatic bi-weekly payment plans for free. Others will charge a small fee. You can always make manual payments for free as often as you like though. Biweekly payments is another way to pay down early without taking a one-time chunk out of your budget.
  3. Add Extra Principal Each Month
    Bi-weekly payments will get you to 13 payments a year, which could shorten a typical 30-year mortgage by four to six years, but you can choose any amount that fits your budget to give each month. Even adding $50 extra a month in principal to your loan could take a year or two off the end. If your budget allows for more than a 13th payment, you can simply add a larger total to the principal each month and shave years off your mortgage faster.
  4. Refinance Your Mortgage
    You could pay down your mortgage off early if you can get a lower interest rate. By refinancing into a lower rate, you pay less in interest and can contribute more of your monthly budget toward loan principal. Another refinancing option is to shorten the loan-term. Instead of a 30-year term, you could switch into a 15-year mortgage. The monthly payments will be higher, but you will force yourself to pay off your loan sooner and save on thousands of dollars of interest in the end.
  5. Recast Your Loan
    Some home loan lenders will allow you recast your mortgage with a large lump sum payment. That means you are essentially resetting the amortization schedule on your loan. This is helpful if you receive an inheritance or some other windfall or if you are able to take out a significant amount from an investment that you can apply to your mortgage. Recasting keeps the loan terms the same but reduces the monthly mortgage payment by adding that large, one-time payment to the principal. A lower payment can help you more easily add more each month and pay off early.

Before you start trying to pay off your mortgage faster, be sure to have a emergency fund set aside and have plans in place for retirement. If those things are taken care of and you have extra money in your budget, paying off your home loan early can be a huge financial benefit to you.


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Holmgren and Associates

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Oakland, California 94611
Phone: 510-339-2121
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Holmgren & Associates is a branch of Finance of America. We are a full service mortgage banker with an experienced staff offering expertise in residential mortgage lending, with primary focus on loans for home purchase, refinance, and reverse mortgages.

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