How to Pay Off Your Mortgage Faster

Making more aggressive progress toward paying off your mortgage allows you to build equity in your home and gives you financial options.

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Written by Taylor Getler
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Edited by Johanna Arnone
Assistant Assigning Editor
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There are benefits to paying off your mortgage early. You’ll save money by making fewer interest payments, and you’ll free up some of your paycheck by eliminating a major monthly expense.

Your home equity — the percentage of your home that you actually own — is also a mighty resource to tap if you’re hit with an unexpected expense or want to finance an improvement to the house. Making a larger dent in your mortgage balance can be worthwhile even before you’ve paid it off, because you can borrow against that equity if needed.

How much equity do you have?
Your home equity can help you pay for improvements. NerdWallet can show you how much is available.

While paying off your mortgage early can save you money in the long run, you also need to keep your financial life in balance by paying off high-interest debt, saving for retirement and other major goals and being ready for emergencies.

Here are some strategies for building your equity and paying off your mortgage faster.

If you’re buying a home

If you’re getting ready to buy a home, these strategies can help expedite your timeline for owning it outright.

Save for a sizeable down payment

Get a head start with a larger down payment, since that is instant equity. Put down 20% or more of the property’s value for a bonus — you’ll avoid pricey private mortgage insurance.

Get a 15-year mortgage

Talk about forced savings: 15-year mortgages often come with a lower interest rate, and you’ll save on the total interest because you’re paying for less time. But there's a catch, your monthly payments are higher with a 15-year home loan.

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If you currently own a home

If you’re a current homeowner looking to pay off your mortgage faster, you may consider these strategies.

Refinance your mortgage

If mortgage rates have dropped since you initially got your loan, you can refinance to pay less interest. 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.

Pay more on your mortgage

Paying more can be a good option. If you decide to do this, make sure the extra money is applied to your mortgage principal. 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. Here are a few ways to pay more regularly:

• Add an extra sum to your monthly payment. Pick an amount big enough to make a difference but not so big that it crimps your budget. You can make extra payments automatically from your bank to your mortgage account at regular intervals.

• Boost the payment by an amount equal to a twelfth of a payment. By the year’s end, you’ll have made an extra payment.

• Switch to biweekly mortgage payments, 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.

Use gifts, bonuses and windfalls

If you don't want the commitment that comes with a 15-year mortgage or increasing the size of your payment, look for cash that dribbles in here and there. 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. As before, make certain the money goes toward the principal, not interest.

Earmark one partner’s salary

Couples who want to bump up equity in a hurry sometimes take the route of living on one salary while committing the other person’s paychecks to paying down the mortgage.

The belt-tightening can be demanding, but for some the rewards are worthwhile.

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