Many homeowners dream of the day they pay off their mortgage — and for good reason.
It means no more hefty monthly payments, no more costly interest charges, and, for most homeowners, it frees up thousands in extra cash flow. (It’s true: According to the Mortgage Bankers Association, the median new mortgage payment clocked in at $2,256 per month as of April 2024.) Unfortunately, since most U.S. mortgages have 30-year terms, it usually takes decades to pay off a mortgage. And that’s only if you don’t sell the home and move before then, potentially buying another house and starting the whole process over.
Are you looking for financial freedom a bit earlier? It’s possible, but it takes some planning. Read these seven tips for how to pay off your mortgage faster and decide which are the best for you.
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Read more: What percentage of your income should go to a mortgage?
1. Make bi-weekly mortgage payments
If you’re wondering how to pay off a home loan fast, making bi-weekly payments is one of your best options. With this strategy, you take your monthly mortgage payment, divide it in half, and make that half payment every two weeks (for example, every other Friday) to your mortgage lender.
Since there are 52 weeks in the year, this amounts to 13 full monthly payments annually. It might not seem huge, but it can shave years off your loan and thousands of dollars in mortgage interest over time.
Here’s an example: Let’s say you took out a $400,000 mortgage with a 30-year term at a 7% mortgage rate, with your first payment due in June 2024. This would give you a $2,661 monthly payment and an estimated mortgage payoff date of May 2054. See the chart below for how bi-weekly payments would change that.
Maybe bi-weekly payments don’t align with your paydays, or you just don’t want to deal with the hassle of paying every two weeks. If that’s the case, commit to making one extra mortgage payment per year — at any point in the year.
As with the bi-weekly payment strategy, this will reduce your mortgage principal balance faster and cut down your long-term interest fees by quite a bit. A quick tip, though: The earlier you can make your extra payment, the better, as it decreases the interest you’ll owe on all subsequent payments.
When you make these additional payments, be sure to tell your lender to apply them directly to the principal. Otherwise, they may hold them in your escrow account and just submit them on your regular due date, negating the benefits.
Another option is to simply make an extra payment once in a while. It may not be as effective as paying extra consistently, but every little bit counts when you’re paying interest.
A good idea is to use this strategy with windfalls — unexpected money you come into throughout the year. This can include things like tax refunds, birthday gifts, holiday bonuses, tips, or commissions.
And don’t forget to tell your lender to apply these extra payments to your mortgage principal, not your interest or any other fees.
4. Round up your mortgage payment
You can also consider rounding up your mortgage payment. If your payment is $1,825, for example, you might round up to $1,900 or $2,000 if your cash flow allows it. Again, make sure your lender puts that extra money toward the principal, and it should make a notable difference in your long-term interest costs and payoff timeline.
5. Refinance to a lower-rate mortgage
Refinancing your mortgage is another strategy that can help you pay off your loan faster. There are several ways to do this, but if you can secure a lower mortgage rate than what’s on your current loan, that’s the best option. Not only will this reduce your interest costs right off the bat, but if you continue making your old, larger payment on your new loan, it can significantly impact your payoff time too.
For instance, if you have a $250,000 loan balance with a 30-year mortgage term and an 8% rate, you’re currently paying about $1,834 per month. If you refinanced that loan into a new, 30-year loan at a 6.5% rate, your payment would drop to around $1,580. As long as you continue making your old payment, you’ll be putting an extra $254 toward your principal balance every month.
Learn more: How a rate-and-term refinance works
6. Refinance to a shorter-term loan
Refinancing to a shorter loan term can also help borrowers pay off loans faster because it spreads the balance out over fewer months. Just keep in mind that shorter-term loans come with higher monthly payments. (Mortgage lenders usually reward you with lower interest rates, though. According to Freddie Mac, the current average rate on 30-year loans is hovering around 7%. On 15-year loans, it’s closer to 6.25%.)
Dig deeper: 15-year vs. 30-year mortgage — how to decide which is better
Yahoo Tip: Use our free mortgage calculator to see how different interest rates and term lengths would affect your finances.
7. Recast your mortgage
Finally, recasting your mortgage may be able to help. With this strategy, you make a lump sum payment toward your principal balance, and then your lender re-amortizes your loan, spreading the remaining balance and interest across the rest of your term.
Technically, this is meant to lower your monthly payments and make things more affordable, but as with some other strategies, you can use it to pay off the loan earlier too. You’d just need to continue making your old higher payment even after the recast.
When is paying off your mortgage early smart?
Learning how to pay off a mortgage quickly is only one part of the equation. You also need to know when to do it — and when an early mortgage payoff might not be a smart move for your household.
Generally speaking, paying off your loan faster can be smart if:
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You need to free up monthly cash flow.
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Your loan doesn’t have prepayment penalties or paying off the loan would save you more than those penalties cost.
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You wouldn’t drain your emergency fund to pay off the loan.
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The savings outweigh the closing costs (in the case of refinancing).
You might not want to pay off your loan early if your mortgage rate is extremely low (think the sub-3% rates seen during the height of the COVID-19 pandemic). In this case, you may be better off putting your extra funds toward investments, which could offer much higher returns than the 2% to 3% you’d be saving on your mortgage.
Paying off a mortgage faster FAQs
What’s the quickest way to pay off a mortgage?
The quickest way to pay off a mortgage is to make bi-weekly or regular additional payments toward your principal balance. You might also consider refinancing to a lower-rate or shorter-term mortgage loan.
If you put an extra $1,000 toward your mortgage each month, you could significantly reduce your long-term interest costs and pay off your loan much faster. The exact amount you will save depends on the balance, term, and interest rate.
How do I pay off a 30-year mortgage in 10 years?
To pay off a 30-year mortgage in 10 years, you’ll need to make extra payments or increase your monthly payments. Making bi-weekly mortgage payments can also help you repay your loan faster (but probably not that quickly).
This article was edited by Laura Grace Tarpley