There are lots of different ways to pay off your mortgage early. Some take discipline from you, some don't.

One idea- if you refinance your home to a lower payment – keep paying the old payment.  Here is an example:

Loan amount: $300,000
Loan program: 30-year fixed
Current mortgage rate: 5.25%
Current mortgage payment: $1656.61 <= keep making this payment
Refinance mortgage rate: 3.75%
New mortgage payment: $1389.35

If you continue to make the original payment, you will pay an extra $267.26/month to your principal.  That is the equivalent to over two extra payments each year.  That will shorten the term of your loan quickly – as long as you continue to make that original payment.

Another option is to refinance your loan to a shorter term, such as a 15 or 20 year term.  That will allow you to pay off your loan that much quicker.  Both these suggestions involve refinancing your mortgage to a new lower rate and/or term.

There are some other suggestions to help you pay off your loan early.  One is to make larger payments every month – maybe raise your payment by $100/month – that will also help you pay off your loan early.

Other ways to pay down your mortgage early are:

  • make an extra payment every year (or quarterly)
  • round up your current mortgage payment
  • apply your tax refund to your principal balance
  • save up loose change and quarterly apply it toward your principal balance.
  • sign up for bi-weekly payments

Does it make sense to pay off your mortgage early?  For most people their home is their largest asset and it's nice to know that you do not owe any money on that asset.  But look at your situation and make sure it makes sense.  If you have any other debt (credit card or installment) you will want to consider paying that debt first.  Your mortgage interest can be written off on your income taxes, so that is a benefit.  Credit card interest and car loan interest can't.  Pay off credit cards and cars before you work on your mortgage.   

Mortgages are also fairly cheap money right now.  It may make more sense to invest your money into a 401K or IRA to save for your retirement.  

If you aren't sure what makes more sense, talk to your financial planner and ask him.  It may make more sense to keep your mortgage and invest your money – or pay off any other debt. Once you decide on the best plan for you, stick to your plan – there may be emergencies that take you away from your plan, but once you can, get back to your plan!

Leslie Vanderwerf,  NMLS ID#335509, American Mortgage & Equity Consultants, NMLS#150953 - Email - Website

About Leslie Vanderwerf

Currently a Branch Manager for American Mortgage and Equity Consultants, Inc., it's hard to believe I have been in the mortgage business for more than 25 years and have worked with Sharlene since 2000! I love sharing mortgage insights here each week and helping people finance their homes. Listening helps me find the right program for you!

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