Pay Off Your Mortgage Earlier.

mortgage - paid

More people want the security of owning their home free and clear. Aside from the peace of mind of owning your home outright, paying off your mortgage sooner can make sound financial sense by saving you thousands of dollars in interest costs. If you want to pay off your mortgage early, try some of the strategies below.

Pay more. Adding a little payment to your principal here and there can shorten the length of your loan. For starters, try rounding up your payment. Say you have a payment of $754. Think of it as $760. An extra $6 a month on a $200,000, 30-year loan can save you four payments at the end of the mortgage loan.  Want to pay more than that? Use our mortgage calculator to see how an extra $100 a month reduces your interest and shortens the length of your loan. But remember, when you pay extra, make sure it’s applied to the principal balance.

Refinance with a shorter-term mortgage. When refinancing your mortgage you have 10, 15 or 20 year options, but 15-year mortgages are most common. While monthly payments are somewhat higher than a 30-year loan, the interest rate is usually a little lower and you’ll own your home free and clear in less time. More importantly, you’ll pay less; with a 15-year fixed mortgage you’ll pay less than half the total interest cost of the traditional 30-year fixed mortgage. To get the effect of a shorter-term mortgage without the risk, take out a 30-year loan but make payments as if you had a 10 or 15-year loan.

Switch to biweekly payments. Instead of paying your mortgage monthly, you’ll pay every two weeks.  If you pay half of your regular mortgage payment every other week (biweekly), you’ll have made 26 half payments or 13 full monthly payments at the end of the year. The result is a faster loan balance reduction with substantial savings in interest. That extra annual payment can cut about six years off a 30-year mortgage!