How to Pay off Your Mortgage Faster


More than two-thirds of American homeowners had to take a mortgage to finance a home purchase, and more often than not, it is the most significant amount of debt in so many people’s lives. 

Paired with the high interest rates compounded in 15 or 30 years period, It’s no wonder that more and more people are looking for ways to pay off their mortgage earlier. 

In this guide, we will share 6 useful tips you can use to pay off your mortgage earlier, even as fast as just 5 years.

Let us begin with the first and probably the most important thing. 

1. Pay More Down Payment

Remember that the most ideal way to buy a home is actually with 100% down. Since a house is so expensive, paying cash for a home is a concept that sounds weird for most of us, but remember that it is still the most ideal approach.

Of course, it might not be ideal for everyone, as not all of us have the lump sum of money to buy in cash. However, our goal is to maximize our down payment for several reasons:

  • There will be no interest associated with the down payment, only with your loan. Meaning, you will pay fewer amount in interests. 
  • You can avoid private mortgage insurance (PMI) if your down payment is at least 20% of the home’s value. PMI can cost $1,000 to $2,500 a year, so it can be significant in the long run.
  • Your monthly/annual mortgage payment will be more affordable, so you’ll have more flexibility to pay extra amounts as we’ll discuss on the next steps

In general, postpone a purchase to pay more on the down payment. At worst, you should plan to put at least 10% of the house’s value, while more than 20% is the ideal approach.

2. Pay Extra Payments

Obviously there are some of us that are already trapped in a huge mortgage, and paying more down payment is simply no longer an option. In this case, the best approach is to simply pay more money each month/quarter/year to pay off the debt faster. This way, we can avoid paying more interests.

Even by paying an extra house payment each quarter, you’ll pay off the mortgage 11 years earlier (assuming you are on a 30-year mortgage plan). Another popular tactic is to pay half of your mortgage payment every two weeks, known as the biweekly mortgage payment

The principle here is simple, find out the most comfortable schedule to put extra payment. For example, if your job usually gives a huge year-end bonus and you’d want to commit this amount to your mortgage, you’ll effectively pay 13 payments each year (this is a similar amount to the biweekly payment strategy).

When attempting this, there are several key considerations:

  • Don’t forget to include tax and insurance fees on your extra payment.
  • Discuss with your lender for the option to pay these extra payments. Some lenders will process partial payments, while others will refuse. If the lender asks for an extra fee to start this partial payment plan, avoid it and move on to the next point below.
  • If making partial payment is not an option with your lender, simply open a new bank account exclusively for your mortgage payment. Add your extra payment manually, and use all the money within this account for your full mortgage payment. 

3. Save More Money

We won’t be able to put extra mortgage payments if we don’t have the available budget in the first place. To accelerate paying off your mortgage, we have to make sacrifices and cut down our expenses. 

The good thing is, it doesn’t always have to be big sacrifices, as saving just $100 a month and applying it to your mortgage can significantly save more money in interest. In fact, adding just $20 to mortgage payment each month can save over $7,000 on average.

So, cut down on minor expenses by, for example, bringing your own lunch to work, making your own coffee at the office (and avoid spending on Starbucks), or stay at home at the weekends. 

Of course, the more you save each month, the faster you can pay off the mortgage. Make a list of all your monthly expenses, find the ones you can eliminate, and apply the money to your extra mortgage payments.

4. Refinance to A Shorter Plan

Refinancing from a 30-year mortgage to a 15-year fixed-rate mortgage will cut down a very significant amount of money in interest. However, you have to be careful whether your current interest rate is already lower

Refinancing might also cost you on closing costs and other one-off payments, so you there’s also the option of simply paying double each month, so the 30-year plan is effectively a 15-year mortgage.

The principle remains the same: pay extra so you’ll pay faster. Even if you already have a 15-year mortgage, you can also maximize your monthly payment so you can pay it off in just 10 years or less.

5. Increase Your Income

The principle here remains the same: think big, start small. Even increasing your income by just $100 a month can help a lot in paying off your mortgage. Nowadays with the availability of freelance jobs, the gig economy, and ways to use social media and the internet to make extra money, it is definitely possible.

6. Downsize Your Home

This is probably the most drastic and controversial approach: you can always sell your home and use the profits to buy a more affordable one. 

Depending on your house’s current value, the profit might also allow you to completely pay cash for your new home. At the very least, you’ve successfully reduced your debt and will only need to get a small mortgage. Remember that the smaller the balance, you can use the aforementioned steps above to pay it off faster. 

End Words

More often than not, the biggest key in paying off a mortgage is to make sure you are financially ready before you actually purchase the house. In general, make sure that the mortgage payment is 25% or less than your take home pay. If it’s significantly below that number, it’s time to put some extra payments. 

Vice versa, if you need to use more than 25% of your income to pay the mortgage, you might want to find extra sources your income, or downsize. 

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