How to pay off your mortgage faster



If you have a 30-year mortgage, you may feel like you will always be paying for your home. But you can shorten the time it takes to pay off your mortgage by using a number of strategies, many of which do not require additional costs.

When it comes to paying off your mortgage faster, try a combination of the following tactics:

– Make payments every two weeks.

– Budget for additional payment every year.

– Send extra money for the principal amount every month.

– Review your mortgage.

– Refinance your mortgage.

– Choose a mortgage with a flexible term.

– Consider an adjustable rate mortgage.

Make payments every two weeks

To recoup your home faster with this option, divide the amount of the monthly mortgage payment in half and send every two weeks. By the end of the year, you will have made the equivalent of 13 monthly payments. This strategy can shorten the term of a typical 30-year loan by four to six years, depending on your interest rate. With a 15-year mortgage, payments every two weeks can shorten the maturity from one to three years, depending on the loan amount and interest rate.

Not every lender will accept biweekly payments, says Jackie Boyes, senior director of housing and bankruptcy services at the nonprofit credit counseling agency Money Management International. Ask your lender if they accept biweekly payments and how they will be processed.

[Read: Best Mortgage Lenders.]

Copay budget every year

If you don’t want to send payments bi-weekly, you can get similar savings by making an additional payment once a year. A tax refund or bonus can provide you with the cash you need for this strategy. Set aside the full amount against the principal, and you can reduce the repayment period to five years by making additional payments annually.

“The faster you reduce that principal, the lower your total cost of borrowing will be,” said John Pataki, executive vice president and chief banking officer, TIAA Bank.

Send extra money for principal every month

If you cannot afford to make an additional payment every year, consider sending an additional amount every month. “A prepaid mortgage is best for people who lack the discipline to save,” says Robert R. Johnson, professor of finance at Hader College of Business at Creighton University.

You can round your recurring payment to the next $ 100 to keep your records easier, or add $ 100 to your payment. Contact your lender to find out how they handle payments in excess of your regular monthly bill. This additional amount must be applied to the principal to reduce the mortgage term and interest. Actual savings will depend on the terms of your loan and how much extra you pay each month.

Recalculate your mortgage

If you received an inheritance or other windfall income, consider renegotiating your mortgage. Some servicing loans offer this option when they receive a lump sum payment against the principal. When the adjustment is repeated, the companies re-amortize the loan, so the maturity remains the same, but the monthly payment is reduced based on the reduced principal. To pay off your mortgage quickly using this strategy, keep making your previous payment amount and spend extra money for the principal.

However, not all mortgages are subject to review. Loans from the Federal Housing Administration and the US Department of Veterans Affairs are not subject to revision, and large loans are often not accepted either. Lenders have different requirements regarding how often the loan can be changed and how much principal should be charged. Processing fees may also apply.

Refinance your mortgage

Another way to pay off your mortgage faster is refinance your loan… Refinancing can lower the interest rate and lead to significant savings. Homeowners can also refinance for a shorter period to get out of debt faster. For example, instead of refinancing a 30-year mortgage, a new loan can be made for 15 year term… While monthly payments will be higher for a shorter term, consumers can reduce their interest expenses over the life of the loan.

“Many borrowers mistakenly believe that repayments on a 15-year loan will be twice as high as on a 30-year loan,” Johnson says. Instead, the increase could have been much smaller.

For example, the monthly payment of principal and interest on a 30-year mortgage of US $ 200,000 at 4% would be approximately US $ 955. A 15-year mortgage on the same terms would have a monthly principal and interest payment of $ 1,479.

[Read: Best Mortgage Refinance Lenders.]

Choose a mortgage with flexible term

While 15 and 30 year mortgages are the most common, they are not the only options available. Consider if you can afford a shorter amortization period.

If you do decide to refinance, look for a lender that offers a flexible mortgage loan. Shorter terms mean less money paid in interest over time. If you’re not sure which term to choose, an independent mortgage broker can help determine how short a term you can comfortably pay off.

Consider using an adjustable rate mortgage

When the housing market crashed in 2008, adjustable rate mortgages sparked a wave of foreclosures. Loans started with a low initial interest rate, which increased after a certain period. During the recession, homeowners who could initially afford mortgage payments found that they could no longer do so after interest rates increased.

You may be inclined to shy away from adjustable rate mortgages given their mixed history. However, they can still be a useful tool for financially stable families or those looking to relocate in the near future, such as military families. An adjustable interest rate mortgage can help you build up equity in your home quickly, and low interest rates can free up extra money in your household budget to pay off your principal.

“If you are considering an adjustable rate mortgage, take a close look at the details and fully understand the potential increase in interest rate and monthly payment,” says Boyes. “You need to make sure your budget is comfortable with the higher amount.”

[Read: Best Adjustable-Rate Mortgage Lenders.]

How can I pay off my 30 year mortgage in 15 years?

Assuming you have a $ 200,000 mortgage with an interest rate of 4%, you would need to pay an additional $ 500 a month in principal in order to shorten the repayment period to 15 years. This can be a daunting task for many households, but lower payments can significantly affect your payback period and interest savings.

How can I pay off my 30 year mortgage in 10 years?

If you don’t get windfall income, you may have to use a combination of the above strategies to pay off a 30 year mortgage in 10 years. For example, you can refinance to lower your interest rate, choose a shorter loan term, and make additional payments on the principal every month.

Another option is to find creative ways to raise money that you can use to pay off your mortgage quickly, such as renting out a room.

“We’re seeing large numbers of retirees turning unused space in their homes into an income stream by sharing their homes with longtime housemates,” said Riley Gibson, president of Silvernest, an online roommate finder for retirees and vacant lodgings. Gibson says homeowners earn an average of $ 10,000 a year, and they can have lower bills by splitting utility costs. With a $ 200,000 mortgage at 4% per annum, an additional $ 10,000 per year can reduce the 30-year term to 12 years and save the homeowner more than $ 90,000 in interest.

In light of the COVID-19 pandemic, sharing a home could have additional benefits. “Home sharing is also an attractive option for those who have delayed mortgage payments and will have to catch up when the leniency window closes,” Gibson says.

[Read: Best Debt Consolidation Loans.]

How many years will the additional mortgage loan be paid off?

Your savings will depend on the size and duration of the loan. In the example of a $ 200,000 mortgage with a 30-year maturity and 4% interest rate, one additional payment each year can shorten the repayment period by four years and save more than $ 20,000 in interest. To receive these savings, you must be able to apply an additional fee to the founder.

Should I pay off my 30-year mortgage earlier?

To decide how to pay off your mortgage quickly, you need to determine if it fits into your overall financial picture. Before paying off mortgages, homeowners need to be sure they are making contributions to retirement funds such as IRAs and 401 (k) s. Creation of an emergency fund must also take precedence over the payment of the mortgage. Some households may also be eligible for tax credits on owning a mortgage.

Consider these advantages and disadvantages when paying off your mortgage early:


– Paying off your mortgage early can save thousands of dollars in interest payments.

– Money that was previously used for mortgage payments can be redirected to other priorities.

– Avoiding debt can provide peace of mind and minimize the likelihood of losing your home in the event of a job loss or similar event.


– Homeowners will lose their mortgage interest tax deduction, so it may be better to pay off other debt before getting a home loan.

Focusing on the fastest way to pay off your mortgage balances can divert money away from other necessities, such as urgent savings.

– Interest rates on mortgages are so low that it would be financially wiser to invest extra money instead.

“Being debt free is a great financial goal,” Boyes says, “(but) you need to weigh your options.”

Your home can be your greatest asset. You can add value more quickly by using these methods to pay back the principal, reduce the interest owed, and shorten the term of your mortgage by several years.


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