How to Pay Off Your Mortgage Early: Tips and Tricks to Pay Off Your Mortgage Faster

Nicolas Cesare  | 

Owning a home is one of the most important milestones in a person’s life. It represents the ultimate independence, and grants the owner a freedom that they may have never experienced living in rentals or apartment complexes. However, it’s important to remember that you don’t really own a home until you’ve paid your mortgage. Depending on your income and the price of your home, this can take decades.

In order to truly claim your home as your very own — and not just a house that the bank is letting you use — you need to pay off your mortgage. Paying off your mortgage comes with a host of benefits: it frees up income that would’ve otherwise gone towards monthly payments, it puts the property solely in your name, and it protects you from the threat of foreclosure.

By any estimate, you should pay off your mortgage early, if at all possible. Paying off your mortgage early will help you free up those resources sooner, and save you from paying additional interest on your mortgage.

Pay Extra Every Month

The most straightforward way to pay off your mortgage faster is just to make a larger monthly payment. When you first reached a deal to purchase your home, you agreed to specific mortgage terms regarding things like interest rates and required monthly payments. However, just because you agreed to a minimum monthly payment does not mean that you can’t pay more if your income improves.

How to Pay Extra Principal on Your Mortgage

If you decide to make larger monthly payments, contact your bank to make them aware of this. Otherwise they may not apply the full value of your payment to your mortgage. You can refinance your mortgage to negotiate a higher monthly rate, but that’s not necessary. If you’re not sure about the future of your income, it could also be unwise to plan on making larger monthly payments forever. Instead, you can stick to your current mortgage terms while notifying your bank that you’d like to try making larger payments for a while.

By making larger monthly payments on your mortgage, you can chip away at your balance over time. If you do this for long enough, you can end up paying off your mortgage early and avoiding interest that you would have otherwise accrued.

Pay Extra Every Year

Most mortgages are designed with a monthly repayment schedule. That is, you make a payment of an agreed-upon amount once a month and that makes you and your bank square. However — while many lenders operate on a monthly schedule — there’s no law that says it has to be this way. There are other ways to break up payments.

Set Up Bi-Weekly Payments

The first step to making bi-weekly payments is communicating with your bank. Make sure to communicate the fact that you’re going to continue meeting your minimum required payment and that they should expect two checks from you on most months.

We say “most months” because paying bi-weekly is not the same as paying twice a month. There are 26 two-week periods in a year, so if you pay bi-weekly for a year, you’ll actually end up paying a little extra on your mortgage for that year. This is why bi-weekly payments are such a good option to paying off your mortgage early.

Designate Any Spare Money to Pay Off Your Mortgage

Sometimes you experience a permanent boost in income, whether you asked for a raise or got a better job. In these cases, it makes sense to commit to making larger payments over a long period of time. However, in real life income is usually a bit messier than this. If you’ve had a windfall or you’re taking on some temporary work for extra income, you won’t necessarily be able to commit to a long-term plan to make larger payments month over month.

Whenever we come across a little extra cash, it’s tempting to spend it right away. However, you can also put this bonus cash towards your mortgage in one lump sum. By adding these extra funds to your regular mortgage payment, you can end up paying your mortgage off earlier without disrupting your usual income.

Refinance Your Mortgage to Get a Shorter Term

So far the methods that we’ve talked about about discretionary. You choose whether or not you want to start making larger payments, you choose whether or not you want to pay more often, and you choose whether or not you want to pour extra cash into your mortgage. If your financial situation changes, you can always opt out of these options to pay your mortgage faster and return to your usual payment schedule.

However, if you have the financial means, you can also commit to much more drastic changes to your repayment schedule that will pay your mortgage off faster. Of course we’re talking about refinancing your mortgage. Refinancing involves taking out a new loan with new terms to pay off your old mortgage.

This new loan will typically have a lower interest rate and a shorter repayment schedule to boot. This makes refinancing a great way to pay your mortgage faster if you have the means. However, before you talk to your bank make sure that your credit is ready for refinancing so that you can get the best possible deal. Before you sign anything, remember to check any refinancing fees against the savings you expect to get by paying your mortgage off early.

Downsize to Lower Your Mortgage Payment

Downsizing is an extreme option, but it can be very useful in the right context. Downsizing involves moving into a smaller home with a lower value in order to get a smaller mortgage. Downsizing is especially useful for couples whose children have since left the home and for whom retirement is on the horizon. Remember that you can always downsize into a retirement community, effectively killing two birds with one stone.

Downsizing will leave you with a lower mortgage balance overall, making it easier for you to pay off your mortgage early without having to increase your monthly payments.

Take Out a Reverse Mortgage

In an ordinary mortgage, you make regular payments to a bank in exchange for ownership of your home. A reverse mortgage is just the opposite: a bank will make regular payments to you in exchange for some ownership of your home.

If you still have some mortgage payments left to make, any money that you receive as part of a reverse mortgage will go towards those payments first. This means that you can pay off your mortgage early through a reverse mortgage in exchange for some equity on your home. This option is not for everyone, but it can be useful if you’re nearly retirement and you don’t expect to be able to make mortgage payments off of your social security or retirement plan.

Should I Pay Off My Mortgage Early?

Eliminating debt quickly is almost always a good idea, and the same is true for mortgages. In most cases, you should pay off your mortgage early when it’s within your means. Paying off your mortgage faster will free you from monthly minimum payments, allowing you to put your income elsewhere.

Paying Your Mortgage Off Before Retirement

One of the most important reasons to focus on paying off your mortgage faster is when you expect to retire soon. After retirement, you can no longer count on the steady income from  your job to make your mortgage payments, so it’s critical to have your mortgage paid off before you retire.

If you still have quite a few years until retirement, then options like higher payments, lump payments of extra cash, or refinancing are good options to pay off your mortgage before retirement. However, if retirement is very near and you still have a lot of mortgage to pay off, then downsizing or taking out a reverse mortgage might be right for you.

When Should I Not Pay Off My Mortgage Early?

Situations where you should avoid paying your mortgage off faster are rare, but they do exist. Essentially, you need to consider your complete financial situation if you’re thinking about paying off your mortgage early. Here are some general rules to follow:

  • Do not dip into savings accounts to pay off your mortgage faster.
  • Focus on building up an emergency fund before thinking about making additional mortgage payments.
  • Take care of other debts with higher interest rates first. This date will accrue interest more quickly, so it’s important to get it out of the way before focusing on your mortgage. Examples might be your student loans or payday loans, if you have them.

Paying off your mortgage early is a great way to clear up your financial life. For people who are starting to look at retirement, paying off your mortgage faster can be critical so that you aren’t left with a monthly bill and no regular income to pay it with.


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Nick Cesare is a writer from Boise, ID. In his free time he enjoys rock climbing and making avocado toast.

This post was updated May 8, 2018. It was originally published May 12, 2018.