How to Pay Your Mortgage Faster
Prepaying your mortgage can save you thousands of dollars of interest.
There are a number of ways you may go about shortening the life of your
mortgage. Follow these methods to pay off your mortgage faster.
1Start early. The sooner your early mortgage payoff efforts begin, the
more money you will save. Remember that during the first 5 to 7 years of
your mortgage payment history, the bulk of your payments go toward
interest. Any amount you pay over and above your mortgage payments goes
directly toward the principle amount of your loan; therefore, paying more
during those early years is a great way to lower your principle balance
at a time when your monthly installments are primarily interest
2Apply a lump sum toward your mortgage annually. For example, you may use
your tax return money or a holiday bonus directly toward the principle
balance of your mortgage loan, on a yearly basis, in order to drastically
reduce your early mortgage payoff period.
3Refinance into a shorter term. If you have a 30 year fixed mortgage,
then refinancing into a 15 year fixed program is a simple way of
prepaying your mortgage. In addition to the shortened payment period,
lower-term mortgage programs generally come with lower interest rates,
which saves you even more money in the long run.
4Make biweekly mortgage payments.Split your monthly mortgage obligation
in half, and pay these partial mortgage payments every 2 weeks, as
opposed to making 1 payment per month.
For example, if your monthly payment is $700, then paying $350 every 2
weeks will result in 1 extra mortgage payment a year, and an early
mortgage payoff of roughly 7 years for a 30 year mortgage.
You must make arrangements with your lender to pay your mortgage in this
way, or you may enroll in a third-party biweekly mortgage payment plan,
for a fee. Also, make sure that your lender applies your biweekly
payments right away, as opposed to holding them and making a singular
5Add a fixed amount to each monthly payment. Choose an amount that you
can afford each month, then add that amount to your payment. Remember
that any amount over your monthly obligation goes directly toward the
6Send the next month's principle payment amount in with your monthly
payment. Your monthly mortgage bill itemizes the principle and interest
portion of your payments. Sending in the following month's principle
payment with your mortgage payments is a great way to reduce your loan's
principle amount systematically.<
When shopping for a mortgage, choose the lowest-term, lowest-interest
program possible in order to make prepaying your mortgage as easy as
Use an online mortgage payment calculator to try out a variety of
mortgage payments and find out how long it will take you to pay off your
mortgage under each scenario.
Be warned that some loans carry a prepayment penalty, and that paying
those loans off too soon could actually cost you money. Ask your lender
about such penalties when developing your early mortgage payoff plan.
Sources and Citations