So, you’re eager to pay off your mortgage early? That’s a great financial goal to set for yourself!
Not only is there huge freedom in being completely debt-free and living in a paid-for house, but it’s also a great way to build wealth—getting rid of your house payment leaves you with a ton of extra money each month to save for retirement. In fact, the average millionaire pays off their house in just 10.2 years.1
But even though you’re dead set on ditching your mortgage ahead of schedule, you probably have one major question on your mind: How do I pay off my mortgage faster? That’s why we’re going to walk through exactly how to pay off your mortgage early so you can reach your goal and become a debt-free homeowner.
Paying off your home mortgage early is one of the best financial moves you can make. Not only will you save tens of thousands in interest, but you’ll also build significant equity and enjoy the freedom of owning your home outright.
So how can you pay off a 30-year mortgage in just 15 years? While it takes focus and intentionality, it’s very doable with the right strategy.
In this article, we’ll walk through five proven tips to pay off your 30-year mortgage in half the time. Follow these methods to ditch your mortgage ahead of schedule and become debt-free faster.
1. Make Additional Principal Payments
The easiest way to pay off your mortgage early is by making extra payments toward the principal balance. This reduces the amount you owe faster, saving interest over the long run.
For example, let’s say you have a $200,000 mortgage at 4% interest. By making just one extra principal payment of $500 each year, you’d pay off your 30-year loan in 21 years—shaving 9 whole years off the term
The more extra you can pay the faster you’ll become mortgage-free. If you added $500 monthly to the payment above you’d owe $0 in only 11 years!
Before making extra payments, check with your lender about any prepayment penalties or rules. Then be sure to specify the extra amount should go directly to principal.
2. Refinance to a Shorter Loan Term
Refinancing your mortgage to a shorter term is another way to pay off your home faster The most drastic shift is going from a 30-year term to a 15-year loan,
Let’s use the $200,000 mortgage above as an example. By refinancing to a 15-year term at 3.5%, you’d pay off the balance in 15 years (by definition) and save over $60,000 in interest costs.
While your monthly payment would increase, accelerating your payoff date may be worth it if the new payment fits comfortably in your budget. Talk to a lender about your refi options.
3. Make a Lump Sum Payment
If you receive a windfall like an inheritance, bonus, or tax refund, consider putting that money toward your mortgage principal. Even a one-time lump sum payment can slash years off your remaining loan term.
For instance, if you made a $10,000 lump sum payment on the original $200,000 mortgage above, you’d pay off the loan in 26 years instead of 30—saving over $15,000 in interest in the process.
Aim to put any extra funds you receive directly toward your mortgage paydown. Every bit helps shorten the term.
4. Increase Your Monthly Payment
If you don’t have extra cash on hand to make lump sum payments, another simple option is upping your regular monthly mortgage payment.
Using the 30-year $200,000 mortgage example above, increasing your monthly payment by just $100 would pay off the loan in about 23 years—seven years faster.
Even smaller payment bumps of $50 or $25 per month make a dent. Evaluate your budget to see what’s feasible on an ongoing basis.
5. Pay Biweekly Instead of Monthly
Switching to a biweekly payment schedule can speed up your payoff date too. The reason is simple math—biweekly payments add up to the equivalent of one extra month’s payment per year.
In our example, the monthly payment on a $200,000 loan is about $1,000. By paying $500 biweekly instead, you’d make 26 half-payments over the year equaling $13,000. That’s $1,000 more than the regular 12 monthly payments.
Just beware of scams that charge high fees to set up biweekly payments. You can easily do this yourself manually or through automatic bank drafts. The effect is the same.
Become Mortgage-Free Faster
Paying off your home ahead of schedule takes focus and commitment. But by following one or more of these five tips, you can easily transition a 30-year mortgage into a 15-year payoff.
The freedom of owning your home free and clear is well worth the extra effort now. So start directing any extra cash toward your mortgage principal today to become debt-free faster.
Refinance (or pretend you did).
Another way to pay off your mortgage early is to trade it in for a new loan with a lower interest rate or a shorter term (or both)—like a 15-year fixed-rate mortgage. Let’s see how this would affect our earlier example—a 30-year $240,000 mortgage with a 7% interest rate.
If you kept the 30-year mortgage and made all your payments on schedule for those three decades, you’ll pay about $335,000 in total interest over the life of the loan. But if you switch to a 15-year mortgage with a lower rate of 6.5%, you’ll save close to $200,000—and you’ll pay off your home in half the time!
Sure, a 15-year mortgage will come with a bigger monthly payment. But if you can comfortably fit it within your monthly budget (meaning the payment is at or below 25% of your take-home pay), it’ll totally be worth it. And don’t forget, you’ll likely have boosted your income or lowered your cost of living from the time you first took out your mortgage—in that case, you’d definitely be able to handle the bigger payment.
If you want to refinance to a mortgage you can pay off fast, talk to an expert at Churchill Mortgage. Our team at Ramsey has worked with Churchill Mortgage for years, and their mortgage experts will show you the true cost—and savings—of each loan option. They’ll also coach you to make the best decision based on your budget and goals.
If you already have a low interest rate on a 30-year loan, don’t worry about refinancing. Go ahead and treat your 30-year mortgage like a 15-year mortgage by upping your monthly payment.
Downsizing your house may sound like a drastic step. But if you’re determined to pay off your mortgage faster, consider selling your larger home and using the profits to buy a smaller, less expensive house.
With the profits from selling your bigger house, you may be able to pay 100% cash for your new home. But even if you do have to get a small mortgage, you’ll still reduce your debt and wind up with lower payments.
Remember though: Your goal is to get rid of that new mortgage as quickly as possible. So use the smaller balance and lower payments you get from downsizing to accelerate paying off your home. This isn’t an excuse to pocket money in the short-term and delay your payoff.
If you think downsizing your home makes sense for your situation and you’re ready to get the process started, your first step should be hiring a top-notch real estate agent who can help you sell your current house and buy a new one.
You can find one in your area through our RamseyTrusted program, which matches you with pros our team has vetted to make sure they understand how important it is to buy a home you can afford. They won’t pressure you to consider homes that’ll bust your budget.
Make extra room in your budget.
You may have read that last section and thought, But I don’t have any extra money to put toward my house payments! Hang on—you can probably find more money in your budget each month than you realize.
Now, if you aren’t already making a budget every month, start there. Write down your income, list your expenses, subtract your expenses from your income to make sure you aren’t overspending, then track your spending during the month to make sure you’re staying on target.
If you are living on a budget—or once you make your first one—here are some adjustments you can make to free up money for paying off your house early.
- Lower your grocery budget. Chances are, groceries are one of the biggest line items on your budget aside from housing—especially if you have a family. So think about some ways to cut back, like changing stores or shopping sales and in-season produce.
- Stop eating out so much. Okay, I’ll admit this is a tough one for me because I love eating out. But going to restaurants is always more expensive than cooking at home—sometimes a lot more expensive. Cooking at home just 2–3 more times per week can save you a ton in the long run.
- Do an insurance coverage checkup. An independent insurance agent who can shop rates from multiple providers may be able to get you a cheaper price than what you’re currently paying for your coverage. You can start that process by connecting with a RamseyTrusted pro.
- Cancel some subscriptions. These days, it’s super easy to rack up more subscription services than you actually use. Figure out which streaming services you can live without, cancel them, and put the extra cash toward your mortgage.
- Cut back on online shopping. I know, I know . . . Online retailers like Amazon are super convenient with two-day shipping and one-click ordering, but all those orders can add up fast. And if we’re really honest with ourselves, we probably know we don’t need all that stuff in our digital cart. (Dang it!) Cutting back will give you margin to make bigger payments on your mortgage each month.
How to pay off a 30 year Mortgage in 15 Years!
FAQ
Can I pay my 30-year mortgage in 15 years?
There are a couple ways to pay off a 30-year mortgage in 15 years, including making extra payments toward the principal, making biweekly payments, and more. And paying off a home loan early can save a boatload of interest.
What happens if I pay 3 extra mortgage payments a year?
What is the 2 rule for paying off a mortgage?
The 2% rule for a mortgage payoff involves refinancing your mortgage. Refinancing is when you take out a new loan to pay off your existing loan—ideally at a lower interest rate. The 2% rule states that you should aim for a new refinanced rate that is 2% lower than your current rate on the existing mortgage.
What happens if I pay $1000 extra a month on my mortgage?