So, you’re eager to pay off your mortgage early? That’s a great financial goal to set for yourself!
Being completely debt-free and living in a paid-for home not only offers you a great deal of freedom, but it’s also a great way to accumulate wealth because you’ll have a lot more money each month to save for retirement when you eliminate your house payment. In fact, the average millionaire pays off their house in just 10. 2 years. 1.
We’re going to walk through exactly how to pay off your mortgage early so you can achieve your goal and become a debt-free homeowner, but even though you’re set on paying off your mortgage ahead of schedule, you probably have one big question in mind: How do I pay off my mortgage faster?
Dreaming of ditching your mortgage and living debt-free? You’re not alone. Millions of homeowners share this aspiration, and the good news is, it’s totally achievable – even with a $200,000 mortgage hanging over your head.
This guide will equip you with the knowledge and strategies you need to pay off your mortgage faster and unlock the freedom that comes with owning your home outright. Buckle up, because we’re about to dive deep into the world of mortgage acceleration!
The Average Mortgage in the US: A Snapshot
Before we dive into specific strategies, let’s take a quick look at the average mortgage landscape in the US. According to Experian, the average mortgage debt among Americans is $215,655. This means that a $200,000 mortgage falls right within the typical range.
While this might seem like a hefty sum, don’t let it discourage you. With the right approach, you can significantly shorten your mortgage journey and achieve financial freedom much sooner than you think.
Strategies for Accelerating Your Mortgage Payoff:
Now, let’s get down to business. Here are the top strategies you can use to pay off your $200,000 mortgage faster:
1. Embrace the Power of Refinancing:
Refinancing your mortgage can be a game-changer, especially in today’s low-interest-rate environment. By switching to a lower rate, you can potentially save thousands of dollars over the life of your loan and shave years off your repayment timeline.
2. Bi-weekly Payments: A Sneaky Shortcut:
Instead of making monthly payments, consider switching to bi-weekly payments. This might sound like a small tweak, but it can make a big difference. By splitting your monthly payment in half and paying every two weeks, you’ll end up making the equivalent of 13 monthly payments each year. That’s one extra payment per year, which can significantly accelerate your payoff.
3. Extra Payments: The Power of Principal Reduction:
Making extra payments towards your principal balance is a surefire way to speed up your mortgage payoff. Even small amounts can make a big difference. For example, if you can afford to pay an extra $200 per month, you could shave years off your mortgage term and save thousands of dollars in interest.
4. Conquer Other Debts First:
Before you focus on your mortgage, consider tackling other high-interest debts like credit cards or personal loans. By eliminating these debts, you’ll free up more cash flow that you can then redirect towards your mortgage, accelerating your payoff even further.
5. House Hacking: Turn Your Home into a Cash Cow:
If you have extra space in your home, consider renting it out. This “house hacking” strategy can generate additional income that you can use to make extra mortgage payments and speed up your payoff.
6. Tax Refunds and Windfalls: Unexpected Boosts:
Treat unexpected windfalls like tax refunds or bonuses as opportunities to accelerate your mortgage payoff. By putting this extra cash towards your principal balance, you can make a significant dent in your debt and shorten your repayment timeline.
7. Downsizing: A Drastic but Effective Move:
If you’re willing to consider a major lifestyle change, downsizing to a smaller, less expensive home could free up a significant amount of equity that you can use to pay off your existing mortgage much faster.
Remember, the key to paying off your mortgage faster is to be proactive and consistent. By implementing these strategies and staying committed to your financial goals, you can achieve mortgage freedom and unlock a world of financial possibilities.
Here are some additional resources that you may find helpful:
- Credible: Compare mortgage refinance rates and lenders to find the best option for your needs.
- Ramsey Solutions: Access a wealth of financial resources, including articles, podcasts, and calculators to help you manage your money and pay off debt.
- Fox Business: Stay up-to-date on the latest mortgage trends and market insights.
With the right tools and strategies, you can conquer your $200,000 mortgage and achieve your dream of homeownership freedom. So, what are you waiting for? Start your mortgage acceleration journey today!
Make extra house payments.
Alright, so you probably don’t need me to remind you that each dollar you contribute to your mortgage payment increases the amount of principal that is owed. And that implies that you can shorten the length of your mortgage by years and avoid paying thousands of dollars in interest if you make just one additional payment each year.
How does that work? Let’s crunch the numbers. We will inform you that you have a $240,000, 10-year mortgage with a 7% interest rate and a $1,597% monthly payment for your principal and interest. A mere extra payment once a quarter would result in nearly 15 years of early home payoff! That’s a half-life savings on your mortgage and an incredible $184,000 in interest savings over the course of the loan!
Use our free mortgage payoff calculator to see how much time and money you would save in your particular situation by making extra house payments.
But before you start making those extra payments, let’s go over some ground rules:
- Check with your mortgage company first. Certain companies may impose prepayment penalties or only accept additional payments during designated periods.
- Put a notation on your extra payment indicating that you would like it applied to the principal amount rather than the payment for the next month.
- Refrain from enrolling in a glitzy mortgage acceleration program that requires biweekly payments (more on those later). You can achieve the same result on your own if you are focused and deliberate.
How to Pay Off Your Mortgage Faster: 5 Tips
Before you pay off your mortgage, let’s take a step back and examine some other financial objectives that should be your top priorities. Before you start paying off your house faster, there are four things I want you to do:
- Pay off all of your consumer debt, including student loans, credit card debt, and auto loans.
- Stack an emergency fund three to six months’ worth of regular expenses.
- Begin investing 15% of your income for retirement.
- If you have children, start setting money aside for their college education.
You should concentrate your attention there for the time being if none of those four boxes have been checked. However, if you’ve reached those objectives, you’re prepared to begin making moves toward early home ownership. Exciting!.
Let’s go over five not-so-secret but super helpful tips for making that happen.
$200,000 mortgage paid off in (less than) 5 Years
FAQ
What is the fastest way to pay off a 200K mortgage?
How do I pay off my mortgage faster?
Make one extra mortgage payment per year (consider bi-weekly payments) Many homeowners choose to make one extra payment per year to pay off their mortgage faster. One of the easiest ways to make an extra payment each year is to pay half your mortgage payment every other week instead of paying the full amount once a month.
How to pay off a mortgage early?
Outlined below are a few strategies that can be employed to pay off the mortgage early.: Extra payments are additional payments in addition to the scheduled mortgage payments. Borrowers can make these payments on a one-time basis or over a specified period, such as monthly or annually.
How do I make an extra mortgage payment each year?
One of the easiest ways to make an extra payment each year is to pay half your mortgage payment every other week instead of paying the full amount once a month. This is known as “bi-weekly payments.” When you make bi-weekly instead of monthly payments, you end up adding one extra payment each year.
How does the early mortgage payoff calculator work?
NerdWallet’s early mortgage payoff calculator figures it out for you. The mortgage payoff calculator shows you: How much more principal you would have to pay every month to pay off the loan in a certain number of years. How much interest you would save by paying off the loan early. To fill out the fields, it might help to have one of the following: