How to Pay Off Your Mortgage Faster (Without Refinancing)

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Did you know that mortgages can last for as long as you want them to, whether you are on a 30-year, 15-year, or a 10-year payment term? This is because you have control over how much money you send into your mortgage lender. By using a few of the strategies we discuss below, you can actually pay off your mortgage faster without going through a refinance (though that is a viable option as well).

Now that you are aware of this control you have, setting a goal for how fast you want to pay off your mortgage is the first logical stop. When is your current payoff date? You can use ReadyForZero to figure out when you are currently on track to be mortgage-free. Once you have that date, you can use this tool to plug in the outcomes of some of the options below to see what difference they will make to your specific payoff date.

Ready to get out of mortgage debt earlier than you thought possible? Let’s take a look at some mortgage accelerator options:

Send in Extra Payments in the Most Efficient Way Possible

Hopefully you are able to send in extra payments to make the date that you set using the Ready For Zero tools. And if you’re unsure of where that extra money is going to come from, you can use budgeting spreadsheets like this one to track your monthly spending so that you have enough left over to pay extra on your mortgage (also, keep reading below).

What you need to find out (and it’s best to do this in the beginning so that you don’t scratch your head every time you want to send an extra payment in ) is how your lender accepts extra payments. Can you automate the extra payments separately or should you send it on top of your current payment? Will your lender automatically take the extra off of the principal amount of the loan (which you want), or will they instead take it off of the interest accrued?

A phone call to your mortgage lender can quickly resolve these questions so that you can make your money sweat because it’s working so hard for you.

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Set Your Payments to Bi-Weekly

Some mortgage lenders offer bi-weekly payment programs, while others you might have to work with to get a bi-weekly schedule. Since there are 52 weeks in a year, you would make 26 half-payments using this method, which equals one extra payment per year. The beauty of this system is that if one or more people in your household is paid bi-weekly, you bring home an extra paycheck in the months when you make a half-extra mortgage payment anyway. So you probably won’t miss the money at all!

Get Rid of Your Escrow Account

If you put less than 20% down on your home purchase, then you probably have an escrow account. This just means that the lender must charge you enough money throughout the year (divided over your payments) to pay both your mortgage insurance and your property taxes from a special account they hold for you.

The thing is, if you can get rid of your escrow account and instead save these several thousand dollars each year yourself, then your money can earn a little interest for you. Take that interest earned each year and use it to top off one of your payments!

Squeeze Out More for Principal by Shopping Around for Homeowner’s Insurance

Each month you have to set aside money towards your annual homeowner’s insurance cost either through an escrow account or on your own. If you could lower your homeowner’s insurance cost, then you can send in extra money towards your actual principal. So be sure to shop around. When my husband and I purchased our first home in 2009, we weren’t aware that we had a short amount of time to locate insurance (i.e. before closing day). So we went with the first place we found, which turned out to be really expensive. Just two months later I shopped around and found comparable insurance for a savings of $739 per year! That’s an extra mortgage payment right there on money we were going to spend on housing costs anyway.

A Word of Caution: Be on the Lookout for Prepayment Penalties

Now that you are looking at ways to pay off your mortgage faster, you need to know that you may come across another type of obstacle. Creditors don’t like to take your money early, because it means they will earn less interest overall. To keep their pockets padded, some mortgage lenders will even include prepayment penalty clauses in your mortgage. You’ll want to review your contract, discuss with your lender, and make sure you understand whether or not there are penalties involved on this early payoff track you wish to pursue.

Image Credit: Sarah Gilbert

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  • http://www.color-me-frugal.com/ Dee

    Great tips! My hubby gets paid bi-weekly, so we just make a payment on the mortgage every time he gets paid. We’re hoping to get rid of the mortgage faster this way and it seems like we are on track to do so!

    • http://www.twitter.com/bwfeldman Benjamin Feldman

      Oh, nice! Yeah, the biweekly paychecks can be a great way to transition into biweekly loan payments without much trouble. Glad to hear it’s working for you!

  • Ian

    I like the tips, but I feel like my escrow account is a big boon. It keeps my monetary flow steady and proxies two more bills that I would otherwise have to take time to manage and pay. At 0.1% interest in savings compounded over a year, I’m missing out on a whopping $4.00 in earnings. That’s one potential cost savings I’m glad to give up.

    • http://www.twitter.com/bwfeldman Benjamin Feldman

      I can see how that would be true, Ian. Good point! I’m glad it’s working for you.

  • Christina

    Another quick tip: If you weren’t able to pay the 20% down payment when you took out your mortgage, you are usually required by the lender to have mortgage insurance (different from your homeowners insurance). However, once you pay down your principal balance to below 80% of the “loan to value ratio” (meaning you have over 20% equity), that mortgage insurance policy is supposed to be canceled by your lender. So first, keep an eye on your principal balance if you are paying mortgage insurance, and when you get to the magic cut off number make sure your lender cancels this. You should get a notice that your payment will now be lower because of the lower escrow requirement. THEN take the amount you had been paying for the insurance (usually $50+/month) and add it to your monthly principal payment. Your payment will be the same but your loan balance will go down faster. Best part is that you will be making a pretty substantial balance impact without even noticing. You are just paying the same amount you’ve been paying all along.

    • http://www.twitter.com/bwfeldman Benjamin Feldman

      Good tips, Christina, thanks!

  • M

    I think all of the information on this sight and the web is very incouraging. I’m an immigrant who became a US citizen a few years ago. I came with nothing and was homeless for a period of time. I keep reading these posts and reflecting on where a I am today. I’m very blessed as my wife and I will have no mortgage in a couple of years. We’d have paid off a 30 mortgage in 6 along with having no other debt

    Thank you all for keeping us motivated.

    • http://www.twitter.com/bwfeldman Benjamin Feldman

      Wow, that’s amazing! You’ve clearly had some incredible success in coming from such a hard situation and now owning your own home. I’m really glad to hear that our posts have been helpful to you – that makes all the difference to us. Keep up the great work, and always let us know if you have any questions or suggestions for us!