How to Pay Off Your Mortgage Early

Paying off your mortgage early is a common financial goal. Not only does it free up a significant portion of your monthly income, but it also saves you tens of thousands of dollars in interest over the life of the loan. Here are several proven strategies to help you achieve a mortgage-free life sooner.

1. Make Bi-Weekly Payments

Instead of making one full mortgage payment every month, split it in half and pay that amount every two weeks. Because there are 52 weeks in a year, you will make 26 half-payments, which equals 13 full payments. That one extra payment per year goes directly toward the principal, shaving years off your loan term.

2. Add Extra to Your Monthly Payment

If your budget allows, simply add a fixed extra amount to your monthly payment. Even an extra $100 or $200 a month can make a massive difference over time. Ensure you instruct your lender to apply the extra funds directly to the principal balance, not toward future interest.

3. Apply Windfalls to the Principal

Whenever you receive unexpected money—such as a tax refund, a work bonus, an inheritance, or even cash gifts—resist the urge to spend it and instead apply it as a lump-sum payment toward your mortgage principal.

4. Refinance to a Shorter Term

If interest rates have dropped since you bought your home, or if your income has increased, consider refinancing from a 30-year mortgage to a 15-year or 20-year mortgage. While your monthly payment will likely increase, you'll secure a lower interest rate and pay off the loan much faster.

5. Recast Your Mortgage

If you come into a large sum of money, you can make a significant lump-sum payment and ask your lender to "recast" your mortgage. This recalculates your monthly payments based on the new, lower principal balance, while keeping the original interest rate and term. While it doesn't shorten the term directly, the lower required payment makes it easier to continue making extra principal payments.