6 Real-World Strategies for Paying Off Your Mortgage Early

It seems like an impossible dream, but many people pay off their mortgages early, enjoying decades of increased monthly cash flow and the security of knowing they own 100% of the home they live in. You don’t even need a sky-high income or an unexpected inheritance to join their ranks.

Keep reading; we’ll share real-world strategies that people have used to pay off their mortgages early. You’ll also learn several reasons to pay off your mortgage early, as well as when it doesn’t make sense to do so. That way, you can decide which path is best for you and your family.

Table of Contents

1. 1. Switch to biweekly payments
2. 2. Follow a strict budget
3. 3. Refinance
4. 4. Downsize and pay cash for a smaller house
5. 5. Use extra income and windfalls
6. 6. Combine strategies
7. Should you pay off your mortgage early?
   1. When it makes sense
   2. When it doesn’t

1. Switch to biweekly payments

Paying your mortgage biweekly is one of the most straightforward ways to accelerate your mortgage payoff. When you do this, you end up making 13 payments a year instead of 12. Making an extra payment every year can shave years off of your total mortgage term. Another benefit of biweekly payments is that many lenders will let you set them up with autopay.

If you struggle with manually making an extra payment each year, biweekly payments can help you effortlessly pay down your mortgage. Another idea that one Reddit user suggested is to “even out” mortgage payments to pay off the loan faster:

Tips to pay off the loan faster?
byu/Ok-Sort-8191 inMortgages

For example, if your mortgage payment is $2,365 per month, increase it to $2,500 per month. The $135-per-month difference might not seem like much, but it adds up over time. 

2. Follow a strict budget

Many people think that following a strict budget is restrictive, but what it really means is that you pay close attention to your spending habits and carefully consider every purchase. Budgeting often means making harder choices now so that you can reach your financial goals later.

Andy Hill regularly interviews mortgage-free homeowners on his podcast, Marriage, Kids, and Money. In one interview, he spoke with Andrew Dewar, who paid off his mortgage in his 30s by not eating out, using a flip phone, and not traveling while his kids were young:

He made many sacrifices to accomplish his goal, but he says it was worth it to be mortgage-free.

Of course, your budget strategy can look different. One method is to budget based on your values. For example, maybe your family cherishes family vacations, but eating out isn’t as important to you. Writing down what matters most to you makes it easier to cut out the things that don’t to achieve your bigger financial goals.

3. Refinance

Refinancing your mortgage can reduce the total interest you pay over the life of the loan. For example, if you refinance from a 30-year mortgage to a 15-year mortgage, more of each payment will go toward your principal every month, which can help you to be mortgage-free faster.

You can work with a mortgage refinance company, like SoFi, to see whether you’d qualify for a lower interest rate. Refinancing comes with fees and closing costs, though, so it’s a good idea to run the numbers to see if it’s a worthwhile step. Increasing your payment and “pretending” to have a 15-year mortgage can have the same effect, but it requires more discipline.

4. Downsize and pay cash for a smaller house

Luminate Bank recently shared data showing that more than 40% of houses in the United States are mortgage-free. Downsizing to a smaller home is another strategy you can use to achieve mortgage freedom without working extra jobs or cutting expenses. Many people downsize when they retire and don’t want the upkeep of a larger home. 

However, it’s an option everyone can consider, even before retirement. After all, a smaller home means lower utility bills, less house to clean, and less yard work. Many families appreciate being a little closer together and having more money to spend on experiences and vacations rather than a mortgage bill.

5. Use extra income and windfalls

Christine Unfiltered is a YouTube channel that documents a family’s journey to become mortgage-free by age 40:

It took the family eight years to pay off their mortgage, and one strategy they used was to take on side hustles to earn extra money. Christine donated plasma, cleaned houses, and taught classes online to put additional money toward their mortgage.

Another idea is to apply any windfalls you receive to your mortgage payment. If you get a holiday bonus, use it to pay down your mortgage. If you get an unexpected inheritance, make a large payment toward your mortgage. Even one extra payment per year from a windfall can save you thousands of dollars in interest over the life of your loan.

6. Combine strategies

Combining some of the strategies above is a strategy in itself. For example, switching to biweekly payments and applying work bonuses to your mortgage can help accelerate your mortgage payoff. Budgeting, being mindful of your spending, and delaying travel or eating out can all help you achieve this big financial goal.

Should you pay off your mortgage early?

Paying off your mortgage early may not be a good idea for everyone. Here are a few situations when it makes sense and a few when it doesn’t.

When it makes sense

• You’re nearing retirement: If you’re close to retirement and want to improve your monthly cash flow, paying off your mortgage can make sense. Eliminating a $2,000 monthly payment, for example, can free up room in your monthly budget to enjoy your retirement years more.
• You have a high mortgage rate: With rates higher than they were a few years ago, a mortgage with a rate of 6% or higher can be expensive. Paying it down can deliver a risk-free return equal to your rate, which may appeal to homeowners who prioritize certainty over market returns.
• You have a healthy emergency fund: Paying off your mortgage is like the cherry on top of a financial journey. If you’ve met all other financial goals, like having no high-interest debt, a healthy emergency fund, and adequate retirement savings, paying off the mortgage next makes sense.
• You want the feeling of security: Many people argue that you can earn more investing in the market than you would by paying down your mortgage. However, some people don’t like the stress of having debt. One Reddit user who works in sales said paying down their mortgage would really help their mental health by letting them feel less stressed at work knowing their home was fully paid for:

Most efficient mortgage pay off method for first time buyer with high income
byu/OldConference9534 inMortgages

When it doesn’t

• You plan to move soon: If you plan to move soon, it may not be worth aggressively paying down your mortgage debt.  Instead, it might be more important to increase your cash savings to pay for moving and closing costs on your next home. 
• You don’t have an emergency savings: Becoming mortgage-free only makes sense if you have a solid emergency savings and you’ve met your other financial goals. Homes still require maintenance and property tax payments even if you have a paid-off mortgage, so it’s important to have liquid cash available before you aggressively pay down your mortgage.
• You have high-interest debt: If you have high-interest debt, like credit card debt, paying down the higher-interest debt should be your priority. Credit card debt can compound and grow, leaving you with a much higher debt balance, especially if you’re only able to pay the minimum.
• You’re behind on retirement investing and currently have a low interest rate: If you’re behind on retirement savings, the earlier you start investing for retirement, the better. For that reason, it’s better to prioritize retirement savings than paying down your mortgage. This is especially true if you have secured a low interest rate on your home.