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How do I pay off my mortgage early?
One way to pay off your mortgage early is by adding an extra amount to your monthly payments. But how much more should you pay? NerdWallet's early mortgage payoff calculator figures it out for you.
Fill in the blanks with information about your home loan, then enter how many more years you want to pay it. The calculator not only tells you how much more to pay monthly to pay down your principal faster; it also shows how much you'll save in interest.
What the early mortgage payoff calculator does
Do you want to pay off your mortgage early? Maybe you have 27 years remaining on your home loan but you would rather pay it off in 18 years instead. The early payoff calculator demonstrates how to reach your goal.
The mortgage payoff calculator shows you:
How much more principal you would have to pay every month so you can pay off the loan in a certain number of years.
How much interest you would save by paying off the loan early.
There are many reasons you might want to accelerate the mortgage's payoff, but the motivation usually boils down to either or both of these:
You want to own your home free and clear by a milestone in life, such as your retirement or the beginning or end of your kids' college years.
You want to reduce the total interest you pay over the life of the loan.
To steadily pay off the mortgage early, you need to know how much more to pay toward the principal balance every month to accomplish that goal. This calculator lets you do that.
When paying down the principal on a mortgage faster, keep in mind that each servicer has its own procedures for assuring that your extra payments go toward the principal balance instead of toward future payments. Contact your servicer for instructions.
How to use the early mortgage payoff calculator
To fill in the calculator's boxes accurately, consult a recent monthly statement or the first page of the Closing Disclosure that you received when you closed on your mortgage.
Under Loan term (in years), enter the number of years for which your home is financed.
Under What was your mortgage amount?, fill in the loan amount. In the Closing Disclosure, you can find this on the first line of the Loan Terms section.
Under Interest rate, enter the percentage.
Under How many years are left on your mortgage?, you'll need to enter a whole number, so round up or down.
Likewise, under In how many years do you want to pay off your mortgage?, you'll have to enter a whole number, rounding up or down.
Under How much do you still owe (your outstanding balance)?, look for this figure in a recent monthly statement, or contact the mortgage servicer. Or you can use NerdWallet's mortgage amortization calculator and drag the slider to find out how much you still owe.
What the mortgage payoff calculator tells you
The Summary Results section has two subheadings:
How to reach your goal describes how much you would have to pay in principal and interest every month to meet the payoff goal. It lists the original principal-and-interest payment, and how much you would have to add to the minimum monthly payment to meet your goal.
Loan comparison summary describes the total cost of the mortgage in principal and interest payments, the original monthly principal-and-interest payment, the total cost in principal and interest if you pay it off early, and the new monthly principal-and-interest payment to reach your payoff goal.
"New monthly P&I" and "Original monthly P&I" comprise only the principal and interest portions of your monthly payments. Your full monthly payment will include principal and interest, plus the other monthly costs, such as taxes, homeowners insurance and mortgage insurance (if applicable).
The early mortgage payoff calculator also lets you enter different numbers into the "In how many years from now do you want to payoff your mortgage?" box to see how those changes affect your total savings.
For more information about how the process of gradually paying off a mortgage works, see this explanation of mortgage amortization.
Other ways to pay off a mortgage early
Paying off a mortgage early requires you to make extra payments. But there's more than one way to pay off the mortgage early:
Add extra to the monthly payments, as discussed in this article.
A structured way to add extra: Divide your monthly principal payment by 12, then add that amount to each monthly payment. You end up making 13 payments, instead of the required 12 payments, every year.
A variation of the above tip: Deposit one-twelfth of the monthly principal payment into a savings account each month, then use that money to make a 13th payment.
Pay half a mortgage payment every two weeks. You make 26 half-payments, equivalent to 13 full payments a year. If you want to try this, first make sure your mortgage servicer is set up to receive biweekly payments.
Make a lump-sum payment toward the principal. You might do this after receiving a bonus, inheriting money or winning a lottery prize — any time a large sum lands in your checking account. Coordinate with your servicer to ensure that the money goes toward reducing principal.
Refinance to a shorter term. If you can refinance with a lower interest rate, for a shorter term, it's a win-win. For example, you could refinance a 30-year mortgage into a 15-year loan. The monthly payments will almost certainly be higher, and you'll pay closing costs, but your overall interest expense will be dramatically lower.