Tips to Pay Off Your Mortgage Faster

There are benefits to paying off your mortgage early. For one, you’ll save money by making fewer interest payments. You’ll also build home equity faster. What’s more, once you’ve paid off your mortgage you’ll free up some of your paycheck by eliminating a major monthly expense.

Still, while paying off your mortgage early can save you money in the long run, you’ll pay more in the short term. Plus, it means having to balance other aspects of your financial life more carefully, such as paying off high-interest debt, saving for retirement and other major goals, and being prepared for emergencies.

The good news: There are multiple early mortgage payoff options to consider based on your financial situation and lifestyle. Here are some of the most common strategies.

Refinance your mortgage

If mortgage rates have dropped since you initially got your loan, refinancing is often a smart move to lower your monthly payment. You could also refinance to a shorter term, cutting down the repayment timeline. By paying off the loan faster, you’ll eliminate years of interest payments. While you could pay off your loan sooner without refinancing by simply making extra (or larger) payments, you may be missing out on a lower interest rate.

Bear in mind, however, that refinancing comes with closing costs just like the initial mortgage. You can expect to pay between 2% and 6% of the total loan amount in closing costs, so the overall savings will have to outweigh these fees. You’ll also have to calculate how this additional expense affects the new planned payoff timeline.

» MORE: See if refinancing makes sense for you

Make larger monthly mortgage payments

If refinancing doesn’t make sense, paying more toward your existing mortgage could be a good option. If you decide to go this route, make sure you apply the extra money toward your mortgage principal — not the interest. Ask your mortgage servicer (you can find the contact information on your monthly statement) how to do it, and watch your monthly statements to be sure the money is credited correctly.

Pick an amount big enough to make a difference but not so big that it crimps your budget.

Make one extra payment each year

One bonus payment could make a big difference over time. You can do this by making one extra lump-sum payment, or by increasing each monthly payment by one-twelfth. By the year’s end, you’ll have made an extra payment — or 13 total payments.

Switch to biweekly mortgage payments

Rather than saving up to make one extra payment, you can also pay down your mortgage faster by switching to biweekly payments. This would mean paying half the mortgage payment every two weeks instead of a lump sum once a month. This way you'll make 26 half payments over the course of the year, amounting to 13 full payments — equivalent to an extra month's mortgage payment.

» MORE: Should you make biweekly payments?

Use gifts, bonuses and windfalls

If you don't want the bigger immediate financial commitment that comes with a 15-year mortgage, or adding a large sum to your monthly payment, look for cash that dribbles in here and there.

Even adding just $50 to every monthly payment can deliver interest savings in the long run. Rounding up your monthly payment is also an effective strategy and may be even more manageable. Dedicate overtime pay, bonuses or every other bonus to building equity. Cash gifts? Ditto.

If you’re in a position to inherit money, use at least part of it to pay down the mortgage. Your mortgage servicer can tell you how to add dribs and drabs or a big windfall to your equity. Again, make certain the money goes toward the principal, not interest.

» MORE: Should you pay off your mortgage early?

NerdWallet writer Robin Rothstein contributed to this story.