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How to Pay Your Mortgage Off Faster

Paying your mortgage off early can free up money in your budget and help you save on interest.
Let’s look at some strategies for paying your mortgage down faster.

Refinance

Refinancing your mortgage for a lower interest rate can mean big savings just make sure to do the math and factor in things like closing costs, prepayment fees (if applicable) and how long you plan to stay in your home.

You can also refinance for a shorter term to pay off your mortgage more quickly. For example, if you’re 5 years into a 30-year mortgage and refinance for a 15-year term, you’ll finish paying your home off 10 years early.

A shorter term may mean slightly higher payments, but you may be able to save money in interest over the loan term.

Budget for Extra Payments

Making extra payments can take months or years off your repayment term.

To figure out what you can afford in extra payments, look at your budget and consider what makes sense for you. Whether it’s making a single additional payment every year or 5, planning ahead can help you stay on track. Revisit your budget every year or as your income changes to reevaluate how much extra you can put toward your mortgage.

Consider Principal-Only Payment

When you make your regular mortgage payment, the money goes toward both the principal (amount you borrowed) and the interest (cost of borrowing the principal).

If you’re making extra payments, you may be able to designate a principal-only payment. This means the money will be applied just to the loan’s principal, not the interest.

Principal-only payments can reduce the amount of interest you pay overall and allow you to pay off your mortgage sooner. Just make sure your lender allows principal-only payments and that they know this extra money goes toward the principal.

Revisit Your Budget

Taking a critical look at your budget can help you find more opportunities for savings.

Examine your spending and consider ways you can cut back. Can you commit to spending less on clothing? Takeout? Is there anything you’re paying for that you’re not using or line items that you wouldn’t miss, such as a subscription service?

Changing your spending habits even a little bit can help you free up extra cash every month. You can then put this money toward making extra mortgage payments.

Consider Biweekly Payments

Making biweekly payments means making a half payment every two weeks instead of making a full payment every month.

If you make biweekly payments, by the end of the year, you’ll have made 26 half payments (13 full payments). That’s an extra monthly payment each year.

Biweekly payments can be a manageable way to ensure you’re making one full extra payment every year, and they can mean paying off your mortgage early.

If you’re interested in making biweekly payments, check with your lender to see if this is an option.

Use Unexpected Income

If you can’t consistently make extra payments, it may still be worth using extra cash to pay down your mortgage.

Whether the money comes from a side gig, a tax refund or a bonus at work, making the extra payment here and there can help you pay your mortgage off a little sooner.

Why Pay Your Mortgage Off Early?

There are pros and cons to paying your mortgage off early.

Pros of Paying Your Mortgage Off Early

• Savings: Paying off the loan early can mean saving money in interest and freeing up funds in your monthly budget.
• You own your home outright: Being debt-free and fully owning your home can be empowering. It can also bring peace of mind. If you experience a setback like losing your job, a mortgage payment will be one item in your monthly budget you won’t have to worry about.
• More equity available: If you pay off your mortgage, you may have more equity you can access if need be.

Cons of Paying Your Mortgage Off Early

• It may not be your highest-interest debt: Mortgages are secured loans, and secured loans tend to have lower interest rates because they require collateral (in this case, the home). If you have other debt with higher interest rates, it may make sense to focus on paying that off first.
• Prepayment penalties: Some mortgages come with prepayment penalties, typically if you pay the mortgage off within the first few years. Make sure to factor this in if you’re thinking about paying your mortgage off early.
• Lost tax deductions: If you pay off your mortgage, you won’t be able to claim the federal mortgage interest tax deduction. (You’ll, of course, still be able claim any interest you paid that year.)
• Your savings may suffer: It’s also important to be mindful of your savings. Paying your mortgage off early could mean you’re not saving as much and leave you vulnerable if emergency expenses come up.

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Disclosure:

This article is for educational purposes about banking products. It is not intended to provide legal, investment, tax, or financial advice and is not a substitute for professional advice. It does not indicate the availability of any Citi product or service. For advice about your specific circumstances, you should refer to the disclosures financial institutions provide for various products and consult a qualified professional.