
Getting approved for a home loan is the fastest way to purchase your dream property. As such, it’s common for aspiring homeowners to approach private and government-backed lending institutions to access home mortgage financing.
Because home loans involve a significant amount of money, mortgage repayment is often spread out over several decades. Depending on the terms and product, some buyers may find themselves paying monthly amortizations anywhere from 10 to 30 years.
Such a prolonged financial responsibility can put a massive dent in a borrower’s monthly budget. If you want to get out of your debt faster and own your property more quickly, it pays to know the few ways you can pay off your home loan before it matures.
1. Pay Higher Amounts Monthly
If you want to drastically reduce your loan amount and pay off your housing mortgage faster, pay more than you’re due whenever you’re able. Besides shorter loan repayment terms, extra payments can save you hundreds to thousands worth of interest rates that you can use for various investment schemes.
Suppose you’re paying off a USD$ 350,000 loan with a 5% interest for 30 years and a USD$ 1,878.88 monthly amortization. Then after the fifth year, you decide to increase payments by an extra USD$ 250 per month. Using the said amounts and terms, you can reduce your loan term by five years and a month, with interest savings of about USD$55,900. You can try using a home loan extra repayment calculator to determine how much faster you can pay off your mortgage and how much you can save.
2. Consider Occasional Lump Sum Payments
If you can’t commit to higher monthly payments, check if you can make periodic lump-sum payments. This is applicable, especially if you plan on paying tax refunds, salary bonuses, sales commissions, and other types of unexpected windfall to reduce mortgage fees. This may also be a viable solution for borrowers whose lenders don’t accept other forms of repayment, as discussed in the succeeding sections. With lump-sum payments, you may pay against your principal cost, interest fees, or both.
3. Double Your Payment Frequency
Apart from paying an extra amount per month, you can also ask your lender if they allow more frequent or bi-weekly payments. This will halve your payment term, making you debt-free in 15 instead of 30 years.
Take note that some lenders impose prepayment penalties, asking you to pay about two percent of the total loan amount if you pay earlier than the loan expiration period. So, apart from avoiding these most common home lending mistakes, read the fine print and ask your lender about this option, or choose one that doesn’t require you to pay penalties for paying off your mortgage early.
4. Take Advantage Of Mortgage Recasting
Mortgage recasting is another viable option for buyers who have considerable amounts tucked in their savings. Under this scheme, a borrower will pay a one-time lump sum amount, often more than USD$5,000, to reduce the loan term and monthly repayment amounts. Once the big-ticket payment is made, the lender will adjust the loan amount to reflect the new principal loan cost.
Recasting allows you to keep low-interest rates. Unlike refinancing, recasting only costs a few hundred dollars instead of a few thousand. Unfortunately, not all lenders offer this scheme, particularly government-backed loan programs such as those implemented by the United States Federal Housing Administration and Veteran’s Affairs.
5. Refinance Your Mortage For Shorter And Better Terms
A 30-year loan term may be the top choice for fresh home buyers because of its relatively cheaper monthly repayment fees. But, if you’re not new to borrowing, you’ll notice that average mortgage rates for 15-year loans are lower than 30-year mortgages. This means much of your monthly dues for more extended periods often go to interest rate payments and, therefore, have minimal impact on the principal cost. Additionally, shorter terms require higher monthly payments but also offer lower interest rates. On average, a 20-year loan rate is about 0.25% lower than a 30-year home mortgage.

If you’ve recently had a raise and can afford to pay higher amounts, find a good refinancing deal. Refinancing is the act of switching your current mortgage for a newer one. The refinancing lender will pay off your previous lender, and you’ll then have a new principal cost and lower rates. Besides paying off your loan. at least, a decade earlier, you’ll also enjoy lower interest rates and, therefore, thousands worth of interest payments when you choose to refinance.
Final Thoughts
These are the top ways to lower your loan terms and reduce principal plus interest rates, helping you become debt-free in a shorter period. However, if you have other financial obligations with higher-interest rates such as credit cards, you might be better off focusing on repaying them before switching to the schemes discussed above.
Whatever your decision may be, paying extra cash can go a long way in shaving off your loan terms and amount. The earlier you can get your finances in good shape, the earlier you can focus on growing your money by investing or expanding your portfolio.