How To Easily Pay Off Your Mortgage Early

When my husband and I signed on the dotted line to secure our 30-year mortgage, we vowed that we would not be paying that mortgage for 30 years. Paying extra money towards your mortgage has many benefits – even if you never intend to completely pay it off. If you sell before paying off completely, you will have much more equity in your home since you have more of your mortgage paid off. That means more money in your pocket after you sell!

There are a few different components that make up your “mortgage payment”

  1. Principal – The actual amount you still owe on your loan. A portion of your mortgage payment goes towards this. Note the word “portion”.
  2. Interest – In the first few years of having your loan, interest is a bulk of what your money goes towards each month.
  3. Taxes – Usually your property taxes are included in your monthly payment as well.
  4. Mortgage Insurance – You will have to pay mortgage insurance either monthly, or up-front, if you didnt have atleast 20% of the purchase price in your down payment.

The key to paying extra towards your mortgage is putting it towards your principal. Every extra dollar that you pay towards the principal, will shorten the life of your loan and could end up saving you thousands in interest.  Some mortgage companies might have you do a separate transaction for the extra principal. I pay online and it has a form to add an extra principal payment. Check with your mortgage company to see how you should go about paying extra on the principal – you dont want it going to anything else!

Heres my tactic for paying off early without even realizing it:

Start by adding $20 extra to your principal balance on your monthly payment. Continuously add $20 every month until it starts hurting. Maintain that payment for as long as you can – eventually it will become the norm for you to pay that much! You will probably forget that you are paying extra!

Heres a payoff calculator I use from Bankrate.

With a 30-year, $250,000 loan at 4% interest, if you put only $20 a month towards your principal, you will shave a year off your loan and save almost $7,000 in interest!

With that same loan, if you put $100 a month towards your principal, you will shave over 4 years off your mortgage and save almost $28,000 in interest! Thats a new car!


Another tactic that we use is to take advantage of our tax refund and make a large payment towards our principal once a year. Paying one extra payment completely towards principal has the same effect as paying extra every month. Combine these two tactics for even more savings.

One other approach you can take is pay your mortgage bi-weekly instead of monthly. It builds in an extra payment every year. However, the extra payment is not going completely towards principal so thats something to think about. Find out what works best for your family and budget!

Even if all you do is pay $20 extra every month – you will be thanking yourself later! Give it a try!


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