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Paying Off Mortgage Loan Early - Prepayment Penalty, Refinance Mortgage Loan

Paying Off Your Mortgage Loan Can Save You Thousands

Last Updated: March 16, 2016

Have you ever thought how nice it would be to not have a mortgage payment every month? Second only to the dream of buying a home is actually paying it off. It takes most of us 30 years, during which time we end up paying more in interest than we pay on the home's actual purchase price. So the sooner you can pay off your mortgage, the more money you'll save - thousands, if not tens-of-thousands, of dollars over the lifetime of your loan.

Weigh All Your Mortgage Options Before Buying a Home

Your ability to pay off your mortgage starts well before your first payment is due; before you sign on the dotted line; even before you find the house you want to buy. If you're in the market for a home, the time is now to start thinking about paying off your mortgage:

Make Extra Payments

It sounds simple enough because it is - the way to pay off your mortgage is make more payments toward the principle balance. Not only does this reduce the length of the terms of your loan but, as the principle shrinks, so does the interest. The complication, of course, is figuring out how to make extra payments works for you:

Extra Payment Plan

Mortgage & Interest Rate

Total Interest Saved

Reduced Payments

The Dollar-a-Month Plan

$150K at 6% Fixed

$52,000

Paid Off in 22 years

Bi-Weekly Payments

$150K at 6% Fixed

$37,000

Paid Off in 24 years

15-Year Switch

$150K at 5.5% Fixed

$103,000

Paid Off in 15 years

mortgage loans

Make Sure Your Extra Payments are Going Toward the Principle

When you send in more money than is due for your regular monthly mortgage payment, lenders may not know what to do with it. Instead of putting it toward the principle, they may simply apply it to next month's mortgage payment. It's your job to specify, in the memo line of your check for example, that you want the extra money to go toward the principle of your loan. Then, equally important, is follow-up, making sure your extra payments are being applied accordingly.

Determine Whether You Need to Refinance

The terms of your mortgage could make paying it off difficult. Consider refinancing if:

Whether you're already years into a mortgage, or in the market for your first home, the time is now to take control. With a little resourcefulness and discipline, you can pay off your mortgage sooner than later - saving money and buying peace of mind.

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