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.
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.
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.