How to Pay Off Your Mortgage Early (5 Simple Strategies)

For most people, a mortgage is the single largest debt they'll ever have. The idea of being "mortgage-free" can feel like a distant dream, but it's more achievable than you think. By using a few simple strategies, you can pay off your mortgage early, build equity faster, and save tens of thousands of dollars in interest. This guide breaks down the five most effective ways to shorten the life of your loan.

Key Takeaways

»The core strategy is to make extra mortgage payments that go directly toward your mortgage principal.
»A simple way to do this is by making bi-weekly mortgage payments, which adds up to one extra payment per year.
»Refinancing from a 30-year to a 15-year loan can save you a massive amount in interest but comes with a higher monthly payment.
»Always ensure any extra payments are marked as "Apply to Principal Only" to be effective.

1. Make Bi-Weekly Payments

This is perhaps the easiest and most "painless" way to pay off your loan faster. Instead of making 12 monthly payments, you pay half your monthly amount every two weeks. Because there are 52 weeks in a year, this adds up to 26 half-payments (or 13 full payments). That one extra payment goes straight to your principal, shaving years off your loan without a noticeable change to your budget.

Bi-Weekly vs. Monthly Payments

Example: $350,000 Loan @ 6.5%

2. Add a Little Extra Each Month

This is the most direct approach. By adding even a small amount—$50, $100, or whatever you can afford—to your regular payment, you attack the principal directly. Make sure to clearly mark this extra amount as "for principal only." You'd be amazed at the impact: adding just $100 extra per month on a $350,000, 30-year loan at 6.5% could save you over $57,000 in interest and pay off your loan 4.5 years early!

Curious how much you could save?

See the exact date your mortgage will be paid off by adding a little extra.

Use the Extra Payment Calculator

3. Make One Extra Payment Per Year

This is similar to the bi-weekly plan but done in a single payment. Use your annual tax refund, a bonus from work, or other windfalls to make a 13th payment. On a 30-year loan, this one change alone can often shave 4-6 years off your mortgage term.

Critically Important Tip!

You must specify that your extra payment should be applied "to principal only." If you don't, the lender may just hold it and apply it to the following month's regular payment (interest + principal), which doesn't save you nearly as much money.

4. Make Occasional Lump-Sum Payments

Did you receive an inheritance, a large commission, or money from selling stock? Applying a large, one-time lump sum payment directly to your principal can make a massive dent. Even one $10,000 payment in the early years of your loan can save you tens of thousands in interest over the long run.

5. Refinance to a Shorter-Term Loan

This is the most aggressive strategy. If your income has increased and you can afford a higher monthly payment, refinancing from a 30-year loan to a 15-year loan is a powerful move. You'll not only pay off your mortgage early (in half the time!), but you'll also typically get a much lower interest rate, supercharging your savings.

Refinance Savings: 30-Year vs. 15-Year

Example: $350,000 Loan @ 6.5% (30yr) vs 5.75% (15yr)

Could you save by refinancing?

Compare your current rate to today's rates and see your potential savings.

Use the Refinance Savings Calculator

The Big Question: Should I Pay Off My Mortgage Early or Invest?

This is the classic financial debate. There's no single right answer, but here's how to think about it:

Paying off your mortgage is a guaranteed, risk-free return. If your interest rate is 6%, paying it down is like earning a 6% return on your money, tax-free and with zero risk.
Investing could provide a higher return. The stock market has historically returned an average of 8-10% per year. If your mortgage rate is low (e.g., 3-4%), you might be better off investing your extra cash and earning a higher return.

Invest vs. Pay Off Mortgage

Comparing $200/mo extra: 6% (Mortgage) vs. 8% (Investing)

A balanced approach is often best: Once you have a healthy emergency fund, consider doing both. Send a little extra to your mortgage principal each month *and* consistently contribute to your retirement accounts.

Frequently Asked Questions (FAQ)

Is it better to make extra payments or a lump sum?

Both are great strategies! Extra monthly payments are easier to budget, while a lump sum payment makes a larger, immediate dent in your principal. The best choice depends on your financial situation.

Should I pay off my mortgage early or invest?

It's a personal choice. Paying off your mortgage is a guaranteed, risk-free 'return' equal to your interest rate. Investing *could* earn a higher return (e.g., 7-10% in the stock market), but it comes with risk. Many people do a combination of both.

How do I ensure my extra payments go to the principal?

When you make an extra payment, you must clearly designate it as 'Apply to Principal Only' on your check or online payment. If you don't, the lender might apply it to next month's interest, which doesn't help you pay the loan off faster.

Is refinancing to a 15-year mortgage a good idea?

It can be fantastic if you can comfortably afford the higher monthly payment. You'll typically get a much lower interest rate and will own your home free and clear in half the time, saving an enormous amount of interest.

Ready to Make a Plan?

Don't just guess. Use our free calculator to see exactly how much you can save by making extra payments.

Calculate Your Payoff Date