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3 Powerful Strategies to Pay Off Your Mortgage Early

3 Powerful Strategies to Pay Off Your Mortgage Early

I have covered buying vs. rentingtwice actually.

Then I moved on to answering the question: Is it dumb to pay off your mortgage early?

After that, I wrote about everything you need to know before you pay off your mortgage early.

Today I am giving you strategies for doing exactly that. Paying off your mortgage early.

As promised, here are 3 quick strategies to pay off you mortgage faster than you ever thought possible…

1. The Short-Term Strategy

Short Term Mortgage

Who said being short is a bad thing? Go for the short and save some money.

This is a big one.

30 years is a long time to pay for a house. Opt for a 15 year mortgage or even a 10. If you can’t afford to take out a mortgage shorter than 30 years, you can’t afford that house.

If you can’t refinance, that’s ok! You can pay a little extra on a 30 year loan to pay it off quicker. Look at how much extra you would have to pay to pay it off early, it’s not much:

This is the amount you would pay every month (for an 8%, $100,000 loan) to pay off your mortgage early:

  • 30 years: $733.76
  • 25 years: $771.82
  • 20 years: $836.44
  • 15 years: $955.65
  • 10 years: $1213.28

Did you notice that there is only a $102.68 difference between paying off this loan in 30 years and paying it off in 20 years? That’s 10 years off your mortgage!

Figure out your numbers and how much you can save with Dave Ramsey’s free mortgage calculator.

Not only do you pay off your mortgage earlier with a shorter loan, but the interest rate is usually much lower as well. Why? Simply because the bank is “stuck” or “locked-in” at that interest rate for a shorter period of time.

2. The First Day Payment Strategy

First Day Payment Strategy

Just leave yourself a little reminder, like this, so you don’t forget to make this first payment.

If you take full advantage of this strategy, it is one of the most powerful ways to make a huge impact on shortening the life of your mortgage without paying extra.

You simply make your first payment on the day the loan is activated (the day the lender starts charging interest) instead of waiting until your first payment is due.

This works so well, because this way, your entire first payment goes towards principle. Principle payments have the most impact during the early years, especially this first payment.

It will make you sick to see how much of each payment is going to principle in the early years of a mortgage. There could be as little as $20 or $30 each month going to principle on a $1200 payment. The rest is going towards interest.

If are already the proud owner of a mortgage, you can still apply this strategy by simply making one extra full payment. It won’t have quite the same effect as it will on the first day, but you will still knock some time off your mortgage.

3. The Famous Split-Payment Strategy

Split Mortgage Payment Strategy

This is just in case you need an example of what splitting looks like.

You’ve probably heard of it. Some people think it’s magic, but it’s actually a really simple concept.

You simply pay half your payment twice per month, instead of making one full payment.

This works in 2 different ways…

  1. Paying half-payments every 2 weeks will cause you to automatically make one extra full payment every year. (26 half-payments per year comes out to a total of 13 full payments instead of the usual 12)
  2. You will lower the principle balance 26 times per year instead of 12.

You can usually set this up with your bank, but if they won’t do it, you can still take advantage of this strategy by adding a little extra to your principle each month.

To figure this out for your mortgage, simply divide the amount of your principle payment (principle only, not escrow or interest) by twelve and add that amount to each month’s payment.

For example, if you have a $500 payment, add $41.67 to your principle every month and you will achieve the same effect.

A Little-Known Strategy (The Best One)

Some people think that all of this information is worthless, because they don’t “believe” in paying off your mortgage early. Their idea is that you can earn more in interest by investing than you can save by paying off your mortgage early. This is true most of the time, at least with the current interest rates, but this doesn’t mean you shouldn’t pay off your mortgage early.

They have good reasons for thinking this way, but I disagree. Paying off your mortgage means having total financial freedom. It’s worth it.

There is actually a compromise between both of these views. And it’s almost always the best strategy for paying off your mortgage early.

I call it “Meet in the Middle” and you can read about it here!

Are you paying off your mortgage early?

Have you used any of these strategies?

Share in the comments!

Photo Credit: Allan Foster, Kanaka Menehune, Gabriela Ferreira, Gabriel Sanz (Glitch)


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  1. Our strategy was to take out a 30-year mortgage but make payments as if it were a 15-year mortgage. Yes, you pay a bit higher interest rate on a 30 vs. 15-year, but I look at that as an insurance premium against the possibility of our income taking some kind of temporary hit (a layoff, for example) over the course of the mortgage. We could revert to the 30-year payment for a while if we needed to. We never did, fortunately! :-)

    • Hey Kurt,

      That’s always a great plan! If you can stay disciplined then there are perks, like you mentioned. It’s nice to make the extra payments without the obligation to do so.

      You’re one of the success stories that it worked for! Thanks for commenting.

  2. I’m with you on this one, Kalen. Total debt freedom is more valuable to us than earning more money via investments. Great post!

    • Hey Laurie,

      Thanks for the comment! It is such a great feeling to be totally free like that. :)

  3. I don’t even own a house yet, but these tips are gold. Unique from what you usually see. When we do buy, we’ll be sure to make that first day payment! And the split orange tip is great, too. Especially if you get paid biweekly, anyways.

    • That’s perfect! If you don’t own a house yet, you can take full advantage of the first day payment strategy, like you said. Thanks so much for the comment and the kind words! Congrats again on getting married. :)

  4. There is two strategy that I use.

    1. If you were paying rent, your landlord would increase rent every year. Why not not increase by 1% your mortgage payment each year.
    2. You have an extra few dollars coming your way, why not add this amount to your mortgage.

    I started with a 25 year mortgage, now my mortgage have become a 10 years mortgage.

    • Hey Alain,

      Those are great strategies. It’s all about getting that extra money toward your principle. That’s awesome that your mortgage has become 10 years! Life is so much better without a mortgage. Thanks for sharing!

  5. All of your suggestions are excellent. I love looking at how much is going towards my principal each money and making bi-weekly payments and paying extra on top of that really helps! Great suggestions and you have me on the edge of my seat to find out your last tip!

    • Hey Brent,

      I can’t wait to publish it! I must say, my next tip is unique. I added your blog to my RSS, and I am looking forward to reading it!

  6. Great tips. Paying off a mortgage early makes a HUGE difference in the amount of interest paid and feel amazing. We’ve been mortgage-free for over five years now. Knowing we don’t owe an outside party for our home is freeing. I highly recommend it.

    • Hello!

      I agree, it’s the most freeing feeling in the world! Financially speaking, of course. You can accomplish so much once your mortgage is gone.

      Thanks for the comment!

  7. Hello. I paid off my mortgage in 2 years. I started by purchasing a home I could afford. Then, I got a 15 year loan. I used the split payment strategy. But I also set weekly challenges for myself to earn more and spend less — and I sent my extra money (weekly) to the mortgage company. It takes discipline, but it can be done.

    • Hey Mike,

      I love that you started by purchasing a house you could afford! That’s the most important step, but most people fail to do that. I commend you on staying disciplined and paying it off. Congratulations!

      Thanks for the comment, Mike!

  8. We are working on paying off our mortgage early, we pay extra when the mortgage payment is due, nothing beats extra payments over and over and over.

    • I agree! Making extra payment consistently can produce great results. It doesn’t really take that much extra to knock years off your mortgage.

      Thanks for the comment!

  9. I have the same plan as Kurt. We are just buying a new house. We are getting a 30 year, but paying it off like it is a 15 year. We use the lower payment as insurance.

    • Hey Grayson,

      That plan works great. I like the idea of doing it that way as long as you can stay disciplined. It seems like you guys can. It’s nice to have the smaller payment as a buffer.

  10. We need a place to live. Shelter from the elements and a place to store our things. Having a space that we can call our own is very important psychologically, the difficulty is finding that space at the right price.

    Paying down the mortgage works on several levels:
    a) you get a guaranteed rate of return – and don’t be fooled by these current low interest rates!
    b) you are buying an asset that, over the
    long term will increase in value, and you are most likely doing it with gearing/leverage
    c) it’s generally quite tax-soft (eg in UK, no Capital Gain Tax on selling a home)
    d) you get the satisfaction of paying off the interest on something that you care about – you might not want to pay off your car loan early (because you don’t really care about that), or your student loans (ditto), but you DO care about where you live

    It’s worth it. Never underestimate the mind-set with money.

    • Wow! Thanks for that awesome comment!

      I agree that mindset is extremely important in dealing with our finances. A home is much more than just another payment. You made some really great points and added a lot of value to this article.

      Thanks so much!

      • thank good old J.Money and RockStarFinance – he gave me a shout out to get me going.

        I owe him three London beers already on my “tab”

        • That’s awesome! I love J, he’s a good dude. I don’t know how London beers equate to American beers in price, but it sounds like a fun time to me. I plan to make it to London one day, hopefully soon. Sooner than later if I get sent over there.

        • I just tried to comment on your blog and I got an “invalid security token” message. First time that’s happened. Not sure what it means, really. Perhaps, an out of country issue?

  11. Great read. We have a 15-year mortgage. We make our monthly payment plus and additional principal-only payment each month. Throughout the month, we’ll make 2 or 3 micro-deposits to our savings account – and at the end of the month, we’ll tally those and throw that against the mortgage. We are 4 years into our mortgage and have shaved 7 months off of the length of the mortgage.

    • That’s awesome! You’re on the right track for sure. Starting with a 15 year mortgage gives you such an advantage over a 30 year. Plus, you’re paying it down quicker. You’ll probably have it paid off in 10 or 12 years at this rate.


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