7 Tips to Pay Off a Mortgage Early

Tara Mastroeni
Published: September 22, 2018 | Updated: December 10, 2021

Tips for Paying Off a Mortgage

For most people, their mortgage loan is the single-biggest debt they have — and that can be stressful. All the payments, the looming balance, and the other financial pressures you have weighing on you can be overwhelming. Fortunately, you don’t have to wait 30 years to be done with your high-cost mortgage. With these tips for paying off a mortgage, you’ll be on your way to financial freedom in no time.

Why Pay Off a Mortgage Early?

The biggest benefit to paying off a mortgage early is the money you’ll save in interest. With a smaller balance month over month, your interest payments will also be lower — and that means less paid over the life of your loan.

Paying off your mortgage early also frees up monthly cash flow. You’ll have more funds to put into savings, investments, or other funds that actually make you money, rather than just costing it.

But as with anything, paying off your mortgage early doesn’t come without consequences. Some lenders charge pre-payment penalties for borrowers who pay ahead of schedule. This is simply because of the losses in profits they’ll experience from the pay-off. (Without those monthly interest payments and the full amortization of the loan, their gain on the mortgage will be much lower in the long run.)

If you’re considering paying off your mortgage, then check with your lender before doing so. If there is a pre-payment penalty in place, there is usually a timeframe when the penalty will expire. Mark this date on your calendar, and begin aggressively paying down your loan once the date has passed.

Tips for Paying Off a Mortgage

Tips for Paying Off a Mortgage Early

How do you pay off a mortgage early? If you do decide that paying off your mortgage ahead of schedule is right for you — and that it won’t mean costly pre-payment penalties from your lender — then heed this guidance.

1. Pay off other debts first. It sounds counterintuitive, but if you have debts like credit card balances or car loans — ones that have a higher interest rate than your mortgage — then pay those down first. This will save you more money in interest, thereby giving you more cash to put toward your mortgage payments. It will also help your credit score (just a little bonus!)

2. Make one extra mortgage payment a year. Do you get an annual bonus? Are you expecting a big tax refund? Coming into an inheritance or other windfall? Don’t go on a shopping spree or buy something frivolous. Instead, commit to putting those extra funds toward your mortgage. Just one extra payment a year can cut years off your loan. If you can add in another payment on top of that, it’s even more effective.

3. Consider bi-weekly payments. If you can’t afford a full extra mortgage payment — often quite a large chunk of cash for many homeowners — then consider splitting your monthly payments in two. Instead of paying your mortgage once per month, pay half of that payment every two weeks. Remember that the year actually has 52 weeks, so in the end, this results in a full extra payment without ever requiring a large sum of money all at once. 

4. Find places to cut corners and put those savings toward your mortgage. Have a green thumb? Then start a veggie garden in the yard, and cut out the weekly trips to the farmer’s market. Have neighbors who attend the same school or workplace as your family? Consider carpooling to save on gas money. You can also just opt to bring your lunch or coffee to work each day, instead of eating out. Then, put those funds directly toward your mortgage loan month after month by adding it on to your regular payment. (Just make sure to include a note that stipulates you want that extra money put toward the principal balance — not next month’s payment).

5. Rent it out – With the popularity of Airbnb and other short-term rental sites, it’s easy to turn unused space in your home into a lucrative extra income stream. Are the kids away at college? Put their room on Airbnb or find a local college student who might need housing. Have a basement or garage apartment? Rent it out to local vacationers or around the holidays. Even just a few renters a month can equal an extra mortgage payment or more.

6. Consider refinancing – Refinancing your loan essentially allows you to start anew. You can take advantage of current mortgage rates (as long as they’re lower than what you’re paying now), and you can even shorten your loan term. If you’re currently on an adjustable rate mortgage, refinancing is crucial to both paying the loan off quickly and to doing so affordably. With ARMs, your interest rate can change often, sending your payment — and your ability to pay the loan off — through the roof. Refinancing to a fixed-rate loan is typically the best move in this scenario.

7. Add another stream of income – Renting out space isn’t the only way to make some extra cash to put toward your mortgage. If you’ve got a hobby, the web makes it easy to turn a profit. Put your handmade crafts on Etsy, or sell your design or writing services on a freelancing site like Upwork. You can also drive for a ridesharing program like Uber or Lyft, or consider dog walking, babysitting, housecleaning, or other odd jobs your friends and neighbors might be in need of.

Follow these tips for paying off a mortgage early, be consistent in your efforts and keep a tight rein on your budget, and you can shave years off your payment term in the long run.

Tips for Paying Off a Mortgage

Did You Seller Finance a Property

and Now Want the Buyer to Pay The Mortgage Off Early?

If you’re currently collecting on a mortgage note, consider sending your borrower the tips to paying off a mortgage contained in this post. If they’re still unable to pay the loan off — or they’re unwilling to refinance with another type of lender — then you might want to consider selling real estate notes instead.

Here at Amerinote Xchange, we are specialized mortgage note buyers and other contracts secured by real estate and can give you a cash offer to offload the note from your portfolio. It’s a simple, fast and convenient way to lighten your load and get paid in the note buying process. Contact us today for a free quote.