How to Pay a Mortgage Off Early

After realizing the dream of owning their own home, many people shift focus to getting rid of their mortgage as quickly as possible. Surely this becomes a consideration for most homeowners at some point in time, particularly as thoughts of retirement, a second home or expenses such as children enter the consciousness. Your cash flow is the key factor that dictates exactly how, and how quickly, you pay off your mortgage.

Step 1

Contact your mortgage lender. You can usually find their address, telephone number and website on your monthly mortgage statement. Ask your lender for the payoff amount on your loan. If you have the cash to cover it, you might want to write the check. This is not always the best plan of attack, however, particularly if you have other debt with high interest rates or you benefit by deducting mortgage interest from your taxable income. A call to your financial or tax advisor before taking this step makes sense.

Step 2

Ask your lender -- or a competing lender -- about the possibility of refinancing a 30-year mortgage into a 15-year note. As Jennie L. Phipps of Bankrate writes, you'll need "excellent" credit to get this done, particularly at an attractive interest rate. If you do secure a 15-year mortgage, however, it can greatly shorten the time it takes you to become mortgage-free. And while your monthly payments will most likely rise, you should shell out less interest than you would have by completing your original 30-year mortgage.

Step 3

Put a lump sum of cash toward your mortgage. Phipps estimates that by putting $50,000 toward a $200,000, 30-year mortgage with a 6.5 percent interest rate halfway through the loan, you'll lower your total interest paid out by about $1,000 and become mortgage-free in eight years instead of 15.

Step 4

Send in more than your monthly payment each month. This method can actually pack a serious punch. As Kimberly Lankford notes at Kiplinger.com, if you pay an extra $500 a month, every month, on a $200,000, 30-year mortgage with a 6 percent interest rate, you'll be mortgage free in less than 15 years and save more than $128,000 in interest in the process.

Tip

  • Make sure your mortgage does not include a prepayment penalty, which is a charge you pay your lender for the luxury of paying off your loan early. If your lender did not include notice of a prepayment penalty in your initial contract, you're likely good to go.

About the Author

As a writer since 2002, Rocco Pendola has published numerous academic and popular articles in addition to working as a freelance grant writer and researcher. His work has appeared on SFGate and Planetizen and in the journals "Environment & Behavior" and "Health and Place." Pendola has a Bachelor of Arts in urban studies from San Francisco State University.