How to pay off your mortgage early!

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

Written By

Currently a Senior Loan Officer at Cross Country Mortgage LLC, 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!

Related Posts

Weekly real estate market update… Goldman Sachs predicts the worst is behind us

Market stats are encouraging, as new and coming soon listings show a slight increase… and pending sales continue to rise while price drops decline. Even multiple offers are showing a...

4 Home Binder Printables for Any Stage of Homeownership, and How to Set up the Binder

Looking for a better way to organize your home? Try making a home binder with these 4 printables for any stage of homeownership.

Subscribe to Our Newsletter for Market Updates & Mid-Century Modern Listings

Our weekly HomesMSP Update includes current local market information and a curated list of mid-century modern properties for sale, plus posts from an inspector, a lender, a stager, info about neighborhoods, life in the Twin Cities… even recipes!
Hidden

Blog Categories

Archives

Sharon and John Hensrud

About Us

The HomesMSP Team is committed to meeting you where you are and listening… really listening to understand you so we can use our extensive knowledge of the market and local neighborhoods to give you personalized service.