Finding new ways to pay off your mortgage faster is a topic I can discuss endlessly. When I was aggressively paying down my mortgage, I endlessly researched how to do it by reading all of the things about it. Any article that discussed it hooked me. I was obsessed.
As far as obsessions go, I’d say that paying off your mortgage early is a healthy one to have. Once my wife and I established our goal, we had a one-track mind, and we accomplished that feat in three and a half years by trying everything under the sun, It wasn’t easy, but it was well worth the effort to become debt-free for good.
This post doesn’t cover which is better, paying off your mortgage fast or investing money. Rather, this post discusses how to pay off your mortgage faster if you want to live without that debt hanging over your head.
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How to Pay Your Mortgage off Faster
You may think it’s impossible to pay off a mortgage fast, especially if you have a 30-year mortgage. The 30-year mortgage is the most popular, according to Freddie Mac, and looking at your balance may make you feel like you can’t achieve the goal of living mortgage-free.
Thankfully that’s not the case, and my wife and I are proof of that. If you want to pay off your mortgage early, it is possible with planning and effort. Below are seven ways to pay off your mortgage faster and save thousands of dollars.
1. Refinance Your Mortgage
I worked for seven years in the mortgage industry, and commonly saw one thing – people who wanted to refinance their mortgage. They often did this to get a shorter term to pay off their mortgage faster. This is a good idea in theory, but it doesn’t always make sense for everyone.
Because interest rates have been low for years, don’t refinance to a shorter term if you already have a great interest rate. You’ll only add more money to your principal balance with closing costs.
Simply adding to your current payment to match what you would pay with a shorter term could be all of the “refinancing” that you need. Doing the math prior to the refinancing decision is a vital exercise to determine if it’s worth the cost.
If you do find that you might benefit from a refinance, compare rates at LendingTree to find the lowest rate possible. The lender allows you to compare rates from up to five lenders at once.
If you find a rate that’s .50 percent, or more, lower than your current interest rate, you may benefit by refinancing. Don’t just bank the savings though. The best way to pay off your mortgage early is to continue to make the same payments after refinancing and let the overage go to your principal.
*Related: If you’re looking for affordable homeowner’s insurance, take a look at Liberty Mutual Insurance. You can save 12 percent or more off your price simply by getting your quote online.
2. Never Make a Minimum Payment
Even if you can’t cut 15 or 20 years off of your mortgage, be diligent to never make a minimum payment. Always round up, even if it’s only a few dollars. The small amount may seem insignificant, but over a period of years, those extra dollars result in hundreds or thousands of dollars when you factor the interest savings.
If you’re struggling to figure out where to find that extra money, consider using a tool like Tiller to monitor your spending so you can identify areas to cut back and find extra money for your mortgage.
Every extra dollar you can squeeze out now will save money in interest in the future. Whether it’s an extra $2, $20, or $200, send the extra that you can now and knock at least a few payments off of your mortgage.
3. Throw Everything You Can at It
This step is a continuation of step #2. If you want to know how to pay off your mortgage faster, the best way is to throw all you can at it. You don’t have to be a millionaire to do this, either. My wife and I certainly aren’t. But we did throw every last cent we could at it without sacrificing our retirement to do so.
There are various ways you can raise money to throw at your mortgage, such as:
- Tax refunds
- Saving money each month
- Bonuses from work
- Money received as birthday or Christmas gifts
- Side hustles
All extra payments you make help lower your principal and help pay off your house faster. Below are several guides to help you raise additional funds to help you figure out how to pay off your mortgage early:
Pick an area to start and use the savings or earnings to apply to your mortgage. You can even automate savings with a tool like Trim to increase opportunity.
Trim connects to your bank account to identify services you don’t use and cancels them for you to reap savings. The app also negotiates lower prices on services to help save you money.
4. Set Up Bi-Weekly Payments
If you’re paid bi-weekly like a lot of employees, set up your mortgage payments to auto-draft on payday. This is probably the easiest way to pay off your mortgage quicker.
By doing this, you’ll make 26 half payments per year, which results in one extra payment per year. That’s not likely to sting as much as trying to add on an entire extra payment at the end of the year.
Not all mortgage lenders allow automated bi-weekly payments. It’s best to ask your lender if they offer this option. If they don’t, you can mail in one extra payment each year to accomplish the same result. It’s not as easy as automation, but is still a viable way to pay off your mortgage early.
5. Remember to Make it Fun
While paying off your mortgage is a worthy and ambitious goal, don’t sacrifice what is important to you. This is different for each individual or couple, so only you can identify what that is to you.
Whether it’s weekend trips home to visit family or date nights with your honey, you don’t want to sacrifice those times. It’s well worth an extra few payments on your mortgage to do the things that add joy to your life.
You’ll have to make some sacrifices, but you don’t have to give up everything you love to get there. Continue to spend within your values while working towards paying down your mortgage, or else you risk burnout.
6. Decide What You Can Sacrifice (Just Not Your Retirement)
While I wouldn’t recommend sacrificing what is truly important to you, you’ll undoubtedly have to sacrifice something along the way. Becoming debt-free is an awesome goal, but you don’t want to sacrifice retirement savings to accomplish it.
For example, it’s not wise to sacrifice saving money in your 401(k) to pay off your house early. If your employer offers a match, it’s best to take advantage of the full match and focus on other opportunities to raise income to throw at your mortgage.
You can knock down your mortgage and save for retirement at the same time. It just takes work.
Maybe you have to wait several years to replace your car or delay that trip to Europe. Whatever it is, becoming completely debt-free is worth the sacrifices you’ll make along the way, I promise.
7. Track Your Progress
It sounds like a simple idea, but track your payoff progress in a visual way. It creates excitement when you have a visible reminder to show how well you’re doing.
My wife and I posted our new mortgage statement on our refrigerator every month and text messaged each other during work hours to giggle about how much our principal amount had decreased since our last payment. I know that sounds not sexy at all, but at the time, it undoubtedly was.
When you share common goals with your spouse, it’s pretty exciting, even if it’s something as mundane as paying off debt.
Bottom Line
If you want to pay off your mortgage early, it’s not that difficult. Like any financial situation, much of it is an emotional decision and following a simple philosophy.
Really, it all comes down to this: Stop spending. Save your money. Make it a priority, your number one goal. It’s not rocket science. Throw your heart into it and it’ll happen before you know it.
Happy mortgage-busting!
How close are you to paying off your mortgage? What have you sacrificed to get there? What are some other ways to pay off your mortgage faster you’ve seen be successful?
I’m John Schmoll, a former stockbroker, MBA-grad, published finance writer, and founder of Frugal Rules.
As a veteran of the financial services industry, I’ve worked as a mutual fund administrator, banker, and stockbroker and was Series 7 and 63-licensed, but I left all that behind in 2012 to help people learn how to manage their money.
My goal is to help you gain the knowledge you need to become financially independent with personally-tested financial tools and money-saving solutions.
We are paying down our mortgage too! But my question is: what does “not sacrificing retirement savings” actually mean? What are some guidelines to know how you should balance the retirement savings while paying off mortgage debt? I feel like we might be saving too little (11% of income) but am hesitant to up it until we clear a bit more debt.
Awesome! It’s such an awesome goal to work towards.
That is a great question and it could be different for everyone depending on your situation.
In other words, I’m saying don’t delay saving for retirement just so you can pay off your mortgage. Don’t save $0 for retirement for a few years just so you can pay off your mortgage faster. At the very least, if you have a 401k match from your employer, contribute at least that much to get the free money. Or if you only have an IRA, consider maxing it out before paying extra on your mortgage.
I don’t think it’s worth sacrificing your retirement just to pay off a low interest mortgage. It’s important to get those extra years of compounding interest working for you in your retirement account instead, even if that means delaying your mortgage payoff a couple more years. Hope that helps! 🙂
We are contributing the minimum to get our matches, but that’s all. I’m still wondering if that’s “enough” for us!
Do you have other debt besides your mortgage? If so, prioritize that first before the mortgage. Are you hoping to retire early? If so, focus on maxing out retirement accounts instead of paying down your mortgage so quickly. (I’m also assuming the interest rate on your mortgage is low.)
We are prepaying our mortgage and the loans on our rental properties. I have a date in the future in mind where they should all be paid off around the same time – in about 9 years. I don’t like debt, and mortgages are no exception.
The tips you mention here really do work. We just round up the payments on our home loans and “pretend” the higher payment is our real one. You get used to it.
That’s how it was for us, too. Once we got used to making the higher payments every month, it became almost natural to do it (which sounds weird, but it’s true!)
I’m in the very small minority of personal finance bloggers who thinks it’s smart to NOT pay more than your minimum on your mortgage. With interest rates as low as they are you can throw the difference in investments that are going to (on average) beat the low interest rate on your mortgage. With 3.25% on my 30-year mortgage I just can’t justify putting extra $ towards it.
It was definitely a situation where we followed our hearts. We wanted to be able to say we were completely debt free even if we could possibly make more in the stock market.
I have to admit, now that I’ve been mortgage-free for a year, I don’t regret it! 🙂
We’re mortgage free also and haven’t for one moment regretted paying off the debt faster. It provides a tremendous peace of mind knowing that there is no debt on our house, or anything else at this point in our lives.
It’s a great feeling, isn’t it?
Absolutely!
For those who think it is better to invest rather than pay off the mortgage, I ask: If your house was totally paid-off, would you take out a mortgage against it to put the loan amount into your investment account? Some people say yes, but very few. When most people think about this they answer “no way!”.
The bank doesn’t want our money. 🙁
We have a fixed monthly payment and although I have inherited just enough money to pay down the whole loan I can’t pay it back.
Interest rates are down and the bank doesn’t let me pay my money back earlier than agreed.
I’m guessing you have a prepayment penalty?
Even thought mortgage rates are historically pretty low, there is still a great psychological benefit of getting rid of that huge debt. Right now I’m using these strategies to pay off my student loans since the interest rates are slightly higher than my mortgage. Once they’re gone, I’m coming for you mortgage!
Absolutely agree! My interest rate was only 3.75%, but I was ready to pay it off even if I could make more by investing. And because we were able to pay it off so much faster by not investing as much, we only lost 3.5 years of investing time.
Right now our student loans have a higher interest rate than our mortgage, so many of these principles can be applied to those loans. We could certainly follow through on our mortgage once we knock those things out.
That’s smart to stick to paying off the higher interest debt first.
FR,
Agreed. My payment is around $447 and I pay that, plus an extra $500 at each quarter end or $2,000 extra per year. That is the equivalent of 4.47 extra payments I am making per year, which is sure as heck driving down the mortgage. I make a balance, though, with my investing and probably have an 95/5 split with investing, as my interest rate is fairly low from 2011. Thanks for sharing and can’t agree more with tracking progress, make it fun and stay committed!
-Lanny
An extra 4 or 5 payments per year is huge. Way to go!