Mortgage 101: Early Payoff
POSTED IN ARTICLES ON TUESDAY, JULY 24, 2018
Explore the benefits of paying off your mortgage ahead of schedule.
No matter whether your closing was 10 days or 10 years ago, you're probably eagerly awaiting a very special day: the one where you retire your mortgage. However, you don't have to wait 30 years to enjoy being mortgage-free if you pay yours off early. Some of the big benefits:
- Peace of mind. You don't have to worry about making a house payment if you don't have a mortgage.
- Easier retirement. Housing is a major expense for most families; having yours paid off before your golden years gives you extra stability as you begin to live off your savings and investments.
- Potentially thousands in savings. Each extra penny you pay now is a penny that's not generating interest for the next few decades – interest you no longer have to worry about. Depending on your interest rate and your term, those savings can add up massively.
How do you pay off your mortgage early? It boils down to putting more money toward it, which can be easier said than done. Here are some simple ways to make that happen:
- Turn your bonus into a bonus payment. If you receive a windfall, like a bonus from work or your tax refund, consider using some or all of it to pay down your principal.
- Make an extra monthly payment each year. You can do this by bumping up your monthly payment amount or cutting another check each year.
- Round your payment up. If you can't afford an entire extra payment each year – or if you can afford to do more – pick an amount you feel comfortable with and add that to your bill each month. Every little bit helps!
- Refinance to a shorter term. If the rate on your mortgage is higher than current rates, it might make sense to refinance. Don't let closing costs scare you off; they can be as low as $200 on a 10 & Done loan.
Even small additional payments can add up shockingly fast, potentially knocking years off the life of your loan. Use our mortgage calculator to see how much you could save by paying yours off early.