Must-Have Guide: How to Pay Off Your Mortgage Early

by US Mortgages / January 18, 2019

Imagine paying off your mortgage in full ahead of schedule. Sounds incredible and impossible, right? What would you do with all that extra income you now have instead of sending your hard-earned money to a mortgage loan company? While the idea of paying off your mortgage early sounds far-fetched, it's actually quite attainable.

Below we tell you how to pay off your mortgage early with four easy-to-do tips.

1. Make Biweekly Payments

Typically, you make one monthly payment, but did you know that you can make an entire extra payment a year without having to scrape together more money just by making a half-sized payment every two weeks?

Let's say your monthly mortgage comes to $2000 per month. Try paying $1000 every two weeks instead. This will have the same impact on your budget as one monthly payment would, but since there are 52 weeks in a year, you would actually make 13 full-sized payments versus 12.

2. Make Extra Payments Towards the Principal

Most mortgage lenders will allow you to make an extra payment each month and dedicate it towards "principal only". This means that the extra payment will go toward paying down the principal on the loan versus the standard principal and interest. Paying down even the smallest amount of extra principal early can save you a lot in interest charges, and get you out of the loan years ahead of schedule. If you have a monthly mortgage of $1032, try rounding that number up to $1050 and pay an extra $18/month. Even the slightest amount can add up fast.

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3. Refinance into a Short-Term Loan

Most people have a 30-year mortgage. If you refinance to a 15-year loan, you will pay off your mortgage a lot faster, not to mention the benefit of getting a lower interest rate. Along with the shorter time frame to pay the loan off, you will also pay a lot less in interest over the long run.

See if a shorter term mortgage would make sense for your monthly budget with  our mortgage calculator.

4. Don’t Waste Your Extra Dollars

Do you receive money back at tax time? How about bonuses or even a gift from a family member? Take these dollars and apply them as an extra payment toward your mortgage to help you pay it off early.

Is it a Good Idea to Pay off your Mortgage Early?

While the idea of paying off your mortgage early is tempting, it is also important to look at your overall financial profile to both establish and understand your goals. One reason it might not be a good idea to pay your mortgage off early, is that you may get a better interest rate by investing the extra dollars into the stock market.

Another reason that it wouldn’t be a good idea to pay down your mortgage early is if you have bad debts or other risky financial obligations. You may want those to take precedence.

Now that you know how to pay off your mortgage early, take some time to assess your overall financial profile to see if you can make it happen. You will feel a great sense of pride and freedom if you can make it work. 

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Tags: Home Buying

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