You want to know how to pay off your mortgage faster and you want to do it without it taking up a ton of time. You want to know that what you’re doing has been tested and proven to *work*. Well you’ve come to the right place. As independent experts on paying off mortgages faster, we have already helped thousands of singles and families to crush their debt fast and efficiently.
We bought for $370K. We paid it off in 11 years with a single income and 3 kids
– Tim
Table of Contents
Make Automatic, Extra Repayments Each Month
The single most effective way to pay off your mortgage faster is to make regular, automatic, extra repayments each month or fortnight. While we list many other ways below that can help, make no mistake, they pale in comparison to this one. Do. Not. Skip!
The recommended way to do this is to setup an Automatic, Extra Mortgage Payments each time your normal payment comes out. This allows you to not only change the amount quickly and easily in the future, it also makes the process automatic, greatly increasing the likelihood you’ll stick to it throughout the long term.
Don’t be worried if you can’t come up with that much money just yet, you don’t have to set it up with a huge amount, it can be $1! Just set it up as quickly as possible and start experiencing the automated process and understanding how it works.
Example: Paying an extra $1,000 each month on a $300,000 loan at a 3% interest rate will save you $90,514 in interest and over 16 years.
Quite often, especially with fixed interest loans, your lender or bank might not allow you to make higher or more frequent repayments so it’s good to check with them first. If they do, there could be a limit (for example $10,000 per year) so make sure you’ve confirmed with them that what you’re planning is allowed and that you won’t be penalised
If you’re in the US, you should also make sure to inform your lender that these additional repayments are to be applied to the principal, not interest. If you don’t, the lender can apply them to future scheduled repayments which won’t save you any money.
Have A Goal To Motivate You
It’s common to want to pay off your mortgage on the vague notion that you’d like to be richer or debt free. Common, but dangerous.
The problem with a fuzzy (or non existent) goal is that it’s all too easy to abandon. There is no way to measure success or to keep you on track and this vague “plan” will quickly be forgotten.
Even if you’re paying your mortgage off super quickly, say in 5 years, that’s still 5 years you need to keep up your motivation because without it, there’s sure to be something else to tempt your money away.
This is why having a specific, measurable goal is very important. Here are a few examples:
- To pay the mortgage off before I’m 30 / 35 / 40 / 45…
- To pay the mortgage off before we have children
- To be completely debt free within 10 years
Try and find out WHY you want to pay off your mortgage faster and put that reason in a very visible spot so you never forget it. Make sure it’s clear and on display so you’re regularly reminded about your goal. We recommend putting it in your free Excel Mortgage Calculator Spreadsheet as most people tend to review it regularly. It will also help guide you on what a suitable timeline for paying off your specific mortgage is.
Save Money
Once you’ve setup your extra mortgage repayments, goal and mortgage planning spreadsheet, you should focus as much time and energy as you can on learning How To Save Money. The more money you save, the more you can add to your extra mortgage repayments creating a debt snowball effect that is extremely powerful.
Even small amounts of income, such as bringing your lunch to work rather than buying it, can make a big impact. Try and focus on the biggest items first. Make a very rough list of your major expenses and then attack them one at a time from biggest to smallest. Once again, our Excel Mortgage Calculator Spreadsheet will help you with this.
Example: If you save $10/day by bringing in lunch, 5 days a week, that $50 a week added to the repayments. On a $300,000 loan at a 3% interest rate will save you $35,512 in interest and over 6 years.
For those who are after an even more advanced approach, we encourage you to push 70% of your wage to your mortgage when considering How Much Extra Should You Pay On Your Mortgage. This is what has allowed many of our readers to pay off their mortgages in well under 10 years.
Refinance Your Mortgage
This can be a huge double win if there are cheaper interest rates available. The best way to do this is not only refinance to the lower interest rate, but to then double up the savings by continuing to still pay the same repayment amount each month / fortnight.
Example: Refinancing from an interest rate of 3% to 2% and keeping the same repayments ($1,686/month) on a $300,000 loan will save you $97,676 in interest and over 4 years.
The other reason this is such a huge benefit is that it’s basically a free lunch! Your mortgage repayments don’t change yet you save a huge amount of time and money.
Use Unexpected Income
If you get any unexpected income such as bonuses, inheritance or tax returns you can throw them directly at your mortgage to help bring it down. For one time income sources it can help to keep 5% to spoil yourself with, while committing the remaining 95% bulk to the loan. This way you get a nice immediate and visible benefit from the income, whilst at the same time making great progress on your mortgage.
Even better is to use unexpected regular income such as money you make from a side hustle or small business. Even something as little as $100 extra earned per week can cut almost a decade off your loan.
Example: Adding just $100 a week of income from a side business to the repayments on a $300,000 loan at a 3% interest rate will save you $58,976 in interest and over 10 years.
Switch To Biweekly / Fortnightly Repayments
Switching to fortnightly repayment can save quite a lot of money because it forces you to make 26 payments per year instead of the equivalent of 24 (2 x 12 months) due to how the months/weeks work out in our calendar system.
Obviously with the extra two repayments you end up paying more each year, which in turn reduces your loan term and interest paid. While it’s not a huge amount compared to the other suggestions above, it’s certainly something you should consider.
Example: If you change to Fortnightly repayments on a $300,000 loan at a 3% interest rate, it will save you $20,637 in interest and over 3 years.
Even More Ways…
There are dozens more suggestions out there which would be too much to list in this piece. So if you’re still looking for more ways to get that loan down – and importantly, looking to know which ones are critical ideas and which ones are useless – have a read of Critical Ways To Pay Off Your Mortgage.
Why Should You Pay Off Your Mortgage Faster?
The fact is, your mortgage is the biggest debt you will likely ever have and as such, it carries along with it THE biggest punishment (the extra interest) you will likely ever get. This fact alone is usually a good enough reason for most, however there are many more reasons. There are also a few reasons why you might not want to pay it off faster too.
| Pros | Cons |
|---|---|
| No More Mortgage Repayments | The Extra Repayments Could Earn Your More Through Investments |
| Can Put That Money Towards Other Goals (Retirement / School Fees) | Can Mean Reduced Tax Deductions Depending On Your Countries Laws |
| Saves You $100,000’s In Interest | |
| Reduces Financial Stress | |
| Increases Flexibility And Financial Security |
For more reasons as well as more information to help guide you through the full decision making process, have a read of Should I Pay Off My Mortgage?
When Should You Pay Off Your Mortgage Faster?
Just as important as why is when you should pay off your mortgage faster. At different points in a persons financial journey it can be a good or bad idea to pay off a mortgage depending on where you are. So before you start on your mortgage mutilation journey, make sure you’re at the right point where it make sense and doesn’t actually hinder your progress.
When To:
- You’ve paid off any other higher interest debts like a Credit Card
- You’ve maxed out your retirement contributions if you live in America
- You have an emergency fund saved up and ready to go for at least 1 month
- You’ve made sure that you don’t need the extra money for anything else in the near future
When NOT To:
- You have other higher interest debts. Credit Card or other loans that have a higher interest rate will build up interest faster than your mortgage, so you’ll save more money focusing on these first
- You have other financial obligations. If you have other big ticket items coming up soon like needing a new car, new hot water system or school fees you might want to focus on them first, then come back to your mortgage after
- Your mortgage lender / bank doesn’t allow for more frequent / higher repayments. Quite often, especially with fixed interest loans, your lender or bank might not allow you to make higher or more frequent repayments. If they do, there could be a limit (for example $10,000 per year) so make sure you’ve confirmed with them that what you’re planning is allowed and that you won’t be penalised
We go into even more detail in our piece, Should I Pay Off My Mortgage?
The Best Mortgage Calculators
While mortgage calculators are great for playing around with numbers, they don’t usually promote long term habits that help you as it’s just a bit of fun for 5 minutes while you’re on their site.
A better way is to use our (free) Excel Mortgage Calculator Spreadsheet with Amortization Schedule. This allows you to enter in your own information (privately and in your own controlled file) and then automatically calculate your loan end date among other useful information. This helps you consistently track your progress as you increase your payments.
Two of the best ones we’ve come across in our testing are:
- CommBank Home Loan Repayments Calculator
While this is an Australian bank, you don’t need to be an Aussie to use it. It’s clear, simple but also gives you a wealth of information and (importantly) options to really play around with the numbers - Savings Mortgage Calculator
This one isn’t as pretty, but it allows you to add extra lump sum amounts and also gives you a live read out of the amortisation schedule which is quite handy
FAQs
How To Pay Off A Mortgage In 15 Years
If you have a $300,000 loan at a 3% interest rate, you would need to pay around $375 a fortnight (or about $807 a month) extra towards your principal to change the loan term from 30 to 15 years. Don’t be worried if you can’t come up with that much money just yet, even an extra $100 or $200 a fortnight makes a huge difference. The important part is to take action and start at the amount that’s right for you now.
How To Pay Off A Mortgage In 10 Years
If you have a $300,000 loan at a 3% interest rate, you would need to pay around $753 a fortnight (or about $1,632 a month) extra towards your principal to change the loan term from 30 to 10 years. Don’t be worried if you can’t come up with that much money just yet, even an extra $100 or $200 a fortnight makes a huge difference. The important part is to take action and start at the amount that’s right for you now.
After you’ve started making extra repayments, then you can focus on pushing towards that target. The best ways to do this are 1. Save Money (our 5 part series) or 2. Earning More Income.
How To Pay Off A Mortgage In 5 Years
If you have a $300,000 loan at a 3% interest rate, you would need to pay around $1,904 a fortnight (or about $4,126 a month) extra towards your principal to change the loan term from 30 to 5 years.
This level of mortgage mutilation is extremely advanced, even by our standards. It’s not easy, but it can be done! We have readers that have already paid off their mortgage in 6.5 years or less and have detailed use cases in our Ultimate Guide To Paying Off Your $300K Loan piece that fully outlines exactly how to do it. Do note that it usually takes a dual income family on a medium-high salary to accomplish this feat, but it’s very possible to pay off a $300,000 in even under 5 years.
How Many Years Does An Extra Mortgage Payment Take Off?
The number of years an extra mortgage repayment will take off depends on your loan amount, interest rate and loan term. You also need to be able to have the extra repayment be applied to the principal to get the savings.
As an example using a $200,000 loan at a 4% interest rate and on a 30 year loan term, making an extra monthly repayment each year saves you 4 years off the loan term and $22,000 in interest.
What If I Make Two Extra Mortgage Payments A Year?
If you made two extra mortgage repayments each year on a $300,000 loan at a 3% interest rate, it would save you 6 years and $35,845 in interest
Can My Extra Repayments Go Towards The Principal Balance?
Yes. You may need to contact your lender or bank to request this specifically, especially if you’re in the USA.
The benefits include: 1) How to pay off your mortgage faster than 99% of people with one hour a month of work 2) How to get rid of your debt and have the freedom to spend money on the things you love, guilt free 3) Clear outline of how to setup your expenses, mortgage and general finance 4) How offset accounts work and how to get the same result without being gouged by the big banks 5) How to cut through the crap and focus on the things that truly matter when taking down a mortgage 6) How to adjust the strategy so it works for you, even if you have kids, even if you only have one income 7) How to do all of these things and maintain a normal social life (and never be cheap).
