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How To Pay Off Your Mortgage Early

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Elizabeth Rivelli
Updated March 13, 2022
4 Min Read

Buying a new home is an exciting time. After your offer gets accepted by the seller, you’ll need to contact your mortgage broker and work out the terms of your home loan. Most people get a mortgage with a term period of 15- or 30-years. The longer your mortgage term is, the lower your monthly payments will be, but it also means you’ll pay more interest overtime.

If you want to avoid paying a massive amount of money in interest, you might consider paying off your mortgage early. Here are some effective strategies:

1. Make extra payments

One of the easiest ways to pay down your mortgage faster is to simply make extra payments. The beauty of this strategy is that you can customize it to your personal budget and the amount of money you can comfortably afford. 

For example, if you’re currently making a payment once a month, think about paying half your mortgage payment every two weeks, which will result in 13 full payments at the end of the year. Another option would be to make one additional full payment per quarter, which would equal 16 payments for the year. If you come into some extra money, say around the holidays, you might consider putting some of the funds towards the principal.

2. Put yourself on a budget

If you want to make additional mortgage payments throughout the year, you’ll need to have the extra money to do it. If you’re not already keeping track of how much you’re spending (and on what), now is the time to put yourself on a budget.

Take a look at your essential expenses and your monthly savings goal. Then, figure out where you can cut back to free up some money that can be put towards your mortgage. Keep in mind that putting yourself on a budget will likely mean making some sacrifices, like taking your lunch to work, making your coffee at home, and setting boundaries around dinners out with friends. But if you can pay down your mortgage early, those sacrifices will be worth it. Over the long term, you’ll have more money in your pocket to spend freely or invest.

3. Refinance your mortgage

One of the most popular strategies for paying down a mortgage early is to refinance the loan. Essentially, refinancing means that you’re getting a new mortgage to replace your old one. When you refinance a 30-year mortgage to a 15-year mortgage, for example, you’ll have fewer payments, and you’ll pay less interest overtime. 

However, there is a caveat. Most financial experts only recommend refinancing your mortgage if you can get a better interest rate on a shorter-term loan. Currently, mortgage rates are historically low, so now is a good time to take advantage if you're thinking about refinancing your home loan to pay it off early.

4. Recast your mortgage

Recasting your mortgage is when you keep your existing mortgage, but you pay a one-time lump sum payment towards the loan principal. From there, your lender will adjust your payment schedule based on the new balance, and you’ll shorten the loan term as a result.

One of the biggest upsides of recasting your mortgage is that it’s cheaper than refinancing your home loan. You won’t have to pay mortgage closing costs that are often required when you refinance. Recasting your mortgage is also a good option if you already have a low interest rate. But if your interest rate is higher than you’d like, refinancing your mortgage is probably a smarter move.

5. Purchase a cheaper home

If you’re serious about paying down your mortgage as soon as possible, another option is to consider downsizing to a less expensive home. By selling your current home, you might be able to buy a different home in cash, without needing a mortgage at all.

Even if you can’t afford to buy a less expensive home in cash, you’ll probably need a much smaller mortgage to pay for it. And with a smaller mortgage, you’ll have lower monthly payments, less interest, and a shorter term, all of which can help you pay off your loan faster.


What is the best way to pay off your mortgage early?

There isn’t one best way to pay off your mortgage early. The right strategy for one person may not be the best option for another. It all depends on the size of your mortgage, your current financial situation, your financial goals for the future, and how much effort you’re willing to put in. If you’re thinking about paying off your mortgage early, it’s a good idea to consult with your lender or a financial advisor who can recommend the right strategy for you. 

Is it a good idea to pay off your mortgage early?

Paying off your mortgage early is a good idea for some people, and a bad idea for others, and it always has pros and cons. For example, when you pay off your mortgage early, you’re paying less money in interest, which means you’re paying less to borrow the money. The money that you’re saving in interest could theoretically be put to better use, say for instance, invested in the stock market.

However, paying off your mortgage early also has downsides. If you’re making extra payments or recast your loan, for example, you’ll have less money to spend on other costs, like school tuition, car payments, or a vacation. Additionally, you want to avoid pulling money out of an emergency fund to pay off your mortgage early, because you never know if you’ll need to use that money in the near future.

How can I pay my mortgage off early without refinancing?

If you don’t want to refinance your mortgage, recasting your mortgage can also be a good option. The fees are lower, and you’ll get to keep your existing mortgage. Another effective way to pay down your mortgage faster is to make extra payments. You can choose to make an extra payment quarterly, annually, or whenever you have some extra money in your savings account.

No matter which option you choose, being mindful of your spending habits is important. Creating a budget can help you figure out where you may be able to cut back, so you know exactly how much money you can put towards your mortgage without overspending.