Call Me Now!



Home » Your Money » Mortgages » 5 Essential Tips to Paying Off Your Mortgage Early and Start Living a Debt Free Life

5 Essential Tips to Paying Off Your Mortgage Early and Start Living a Debt Free Life

5 Tricks to Paying Off Your Mortgage EarlyIf you want to get out of debt completely, your biggest obstacle is probably your mortgage. The trend of paying off mortgages early has caught on, with millions who lived through foreclosure and job loss now after the security of owning their home free and clear.

There are many strategies for getting rid of your largest debt, some safer and easier than others. These tricks will get you there, each in a different way.


1. Paying Extra

This is by far the most straightforward way to pay off your mortgage early. To see just how it works, try using a mortgage calculator to see how adding just a small extra payment to your principal will shorten the length of your loan.

This strategy comes with a great bonus: as you pay down your principal, the more every future payment gets applied to the principal as less goes to interest.

If you do nothing else, just round up your payments. If you have a mortgage payment of $788, make it $800. Just make sure those extra payments are applied to your principal balance, not set aside for your next payment. Check your mortgage contract to make sure you have no prepayment penalties, too.


2. Refinance with a 15-Year Loan

Refinancing with a shorter-term mortgage will increase your monthly payments, but not as much as you may think. With a 15-year loan, you’ve committed yourself to a higher monthly payment, so you can’t find a way to get out of it or put off extra payments for another month.

A 30-year mortgage of $100,000 with a 5% rate will put your principal and interest payments at $537. With the same rate at 15 years, you’ll pay $791 instead.

If you’re wary of the risk of forcing yourself to make larger payments, consider just making the payments on your 30-year mortgage as if it were a 15-year loan to put yourself in control. Just remember that actually getting a 15-year mortgage gives you a huge advantage: a lower interest rate, with more savings.


3. Accelerated Bi-Weekly Payments

Accelerated bi-weekly payments will have you making half of your normal monthly payments at a time. At the end of the year, you’ll end up making 26 half-payments instead of 24. This is one of the easiest ways to make extra payments on your principal automatically when you get your paychecks. Every year, you’ll end up making an extra month’s payment toward your principal.

The time you shave off your loan depends on your interest rate. If you have a 4.57% interest rate, for example, you’ll take 4.5 years off your mortgage. A 5.3% interest rate means you’ll take off 5 years.


4. Use Your Tax Deduction to Your Advantage

Determine how much of your tax refund is due to the mortgage interest deduction and schedule an extra payment each year on your loan equivalent to the amount. As you pay down your loan, the amount will decrease because you’ll be paying less interest.

If you’re in the 25% tax bracket and paying a 5% interest rate on your mortgage, you could shave 6.5 years off a 30-year mortgage by putting your tax refund back into the loan. If you have a high interest rate or you’re in a high tax bracket, this is one strategy you can’t afford to overlook.


5. Refinance and Keep Your Payment

Most people who refinance do it to reduce their monthly payments. Still, you can tweak this strategy a bit by refinancing and making the same monthly payment as before to pay off your mortgage early. This strategy will give you the same results as adding an extra payment each month.

These tricks will all get that debt paid off early, but make sure the one you pick works well for you. Don’t be afraid to combine methods, either. For example, you can pay an extra $300 per month to your mortgage and an annual $3,000 tax refund, paying off a 30-year mortgage in 18 years.

Always use a mortgage calculator to see just how your efforts will pay off for you to keep yourself motivated!

Refinance Rates
Free refinance compare rates widget by

About Sean Martin

Sean Martin is a journalist with a passion for financial planning. When he’s not writing, he enjoys cooking and running on the beach.

Leave a Comment