How to Pay Off Your Mortgage Early (2024)

FAQs

How to Pay Off Your Mortgage Early? ›

So if you're 10 years into a 30-year mortgage term, you could potentially refinance to a 10-year term and shave off 10 years. On the flip side, you could go for another 30-year term to lower your monthly payments.

So if you're 10 years into a 30-year mortgage term, you could potentially refinance to a 10-year term and shave off 10 years. On the flip side, you could go for another 30-year term to lower your monthly payments.

Making extra payments of $500/month could save you $60,798 in interest over the life of the loan. You could own your house 13 years sooner than under your current payment. These calculations are tools for learning more about the mortgage process and are for educational/estimation purposes only.

Making additional principal payments will shorten the length of your mortgage term and allow you to build equity faster. Because your balance is being paid down faster, you'll have fewer total payments to make, in-turn leading to more savings.

If you pay $100 extra each month towards principal, you can cut your loan term by more than 4.5 years and reduce the interest paid by more than $26,500. If you pay $200 extra a month towards principal, you can cut your loan term by more than 8 years and reduce the interest paid by more than $44,000.

The Downside of Mortgage Prepayment

Prepaying your mortgage ties up your funds in your home, potentially leaving you with less liquidity for other financial needs or opportunities.

A biweekly mortgage means that the borrower is paying every two weeks, or 26 half payments. The result is effectively 13 full payments over a 12-month period, accelerating the payoff of the loan. The extra payment per year can provide significant savings in total interest over the life of the loan.

Make a note to alert your accountant come tax season: You'll no longer have mortgage interest to deduct on your tax return. Watch your credit. Keep tabs on your credit score; after your mortgage loan is removed from your credit history, your score may drop slightly.

How many years will a 2 extra mortgage payment take off? ›

Faster Loan Payoff

By making 2 additional principal payments each year, you'll pay off your loan significantly faster: Without extra payments: 30 years. With 2 extra payments per year: About 24 years and 7 months.

Make one extra mortgage payment each year

Making an extra mortgage payment each year could reduce the term of your loan significantly. The most budget-friendly way to do this is to pay 1/12 extra each month.

The additional amount will reduce the principal on your mortgage, as well as the total amount of interest you will pay, and the number of payments.

You have high-interest debt.

Rather than make extra payments toward your mortgage principal, consider paying down high-interest debt first. This can include credit card, student loan, medical, and car loan debt, just to name a few.

Make Extra Principal Payments

Putting just $200 more per month toward principal, you'd save $80,837 in interest and pay off the mortgage six years and four months earlier. To pay off this same mortgage in 15 years, however, you would need to put an extra $787 per month from the outset of the mortgage.

Making an extra payment to your mortgage each year will reduce the length of your repayment by several years — generally between four and six years. It will also lower the amount you pay in interest over time and help you build home equity more quickly.

That single extra annual payment will shave six years off your repayment term, so your home loan will be paid off in 24 years rather than 30.

The 10/15 mortgage rule is a concept made popular by a real estate social media influencer. It suggests that homeowners who can afford substantial extra payments can pay off a 30-year mortgage in 15 years by making a weekly extra payment, equal to 10% of their monthly mortgage payment, toward the principal.