How to Pay Your Mortgage Off Early and Finish Paying Forever

Many homeowners dream about the day they make their last payment on their mortgage. That is when the house will truly be theirs. They will be able to live in it rent-free and have the freedom to spend their money on other things. They imagine a big party where they can burn their mortgage paperwork.

Since most mortgages are for thirty years, they have a long wait before the day of the big party. It really doesn't have to take that long. There are many ways you can pay your mortgage off and have your big mortgage-burning party much earlier.

Of course, if you have credit card debt or loans that have higher interest rates than your mortgage, you want to pay them off first. You can use these same techniques for those loans.

Pay off your mortgage early and have a mortgage burning party early.
Pay off your mortgage early and have a mortgage burning party early. | Source

Advantages of Paying Off Your Mortgage Early

By paying off the mortgage, you will have a true feeling of homeownership. You will own your home free and clear. It is your house, and you don't have to share it with the mortgage company.

By paying off your mortgage early, you will also save a great deal in interest costs. The more principal you pay, and the earlier you pay it, the less interest you pay. Sure there are some tax advantages to having a mortgage, but they are based on a percentage of interest you pay. By paying off the mortgage, you stop having to pay any interest.

Should You Buy a Bigger House?

You may be wondering whether it is advantageous to buy a bigger house or otherwise upgrade when they are finished paying their mortgage. Personally, I like to use my house as a place to live first, and only secondarily as an investment that I can sell. Sure, you can try to buy a house as an investment, but then you run the risk of having the value of the house be less than what you paid for it and losing money on the transaction. Don't forget, a bigger house is also more expensive to heat, cool, and otherwise maintain.

To invest in housing, I would buy another house with the extra money and rent it out. This way, I had residual income, and the rent would help pay for the house.

When you are finished paying off your mortgage, you no longer have to make any mortgage payments. You will still have to pay for insurance and taxes, but the amount you used to pay the mortgage is yours to use any way you wish. I recommend investing it, but a nice vacation would be a great reward. The earlier you pay off your mortgage, the earlier you will be able to have your mortgage-burning party.

Paying additional principal on your mortgage is a great investment. Since banks borrow money at low interest rates so they can lend them to others at high interest rates, rates on loans tend to be higher on loans than on savings accounts. You might be able to find places to invest your money that will earn more, but they will likely carry more risk. It is important to compare investment rates when you are paying on your mortgage, in order to use your money wisely.

When your mortgage is paid off, you have a great deal equity in your home. You can leverage this equity to invest in something that will earn you more money. You can start a business or buy more property. If you do it prudently, your home can earn more money for you.


Paying your mortgage off early is not difficult. Here are some easy ways to reduce the principal amount of your mortgage, and bring that final payment date closer.

Closing Costs

Buying a home is an investment, and it is acceptable to get a loan for an investment. Closing costs, however, are a short-term cost and do not increase in value. They should not be added into the mortgage. Some people have asked the seller to pay their closing costs. You pay for this cost in the form of a higher price on the house.

If you didn't have enough money to pay for the closing costs up front, it is okay that you financed it. I understand that you might not have been able to get a house without it. Now, you can consider it a short-term loan, and pay off the amount of the closing costs as soon as possible.

Pay off your mortgage early.
Pay off your mortgage early. | Source

Mortgage Insurance

Putting a 20% down payment on your house is advisable. This way, you can have equity from the house from the beginning. You may get a lower interest rate, and are also saving money because you are borrowing less.

If you have less than 20% down on your house, you may have to buy mortgage insurance to protect your mortgage company in case you default. This mortgage insurance does not go away by itself once you get to 20% down. When you have paid 20% of your principal, you should call your mortgage company and ask them to stop the mortgage insurance. They may ask you to get an appraisal to prove that you have 20% equity in the home. If they completely refuse, consider refinancing. It makes no sense to pay mortgage insurance to protect the mortgage company when you have sufficient equity in the home.

Round Up Your Monthly Payments

Increasing your principal payments by simply rounding up each of your monthly payments can make a big difference in your loan. Those small amounts do add up. You can round to the nearest dollar, but to get an even bigger impact, you can round to the nearest ten dollars or hundred dollars.

Paying Off Your Mortgage Early

Make Extra Principal Payments on Your Mortgage

There are other easy ways to increase your principal payments. Every year, as your income increases, you can apply some (or all) of that increase to paying more money on your monthly mortgage payments.

When you get a financial windfall, such as gifts or your tax refund, apply some or all of that towards principal on your mortgage. A short-term sacrifice now will give you financial freedom in the future.

If you get paid every other week, you have a month in every year where you get an extra paycheck. Use that extra paycheck to pay additional principal on your mortgage.

When you pay off another loan, apply the amount you would be using for the other loan towards the mortgage. Since you have been managing without that payment all this time, you won't miss it.

Paying off your Mortgage

Refinance Your Mortgage

Depending on the interest rate you are paying, it might make sense to refinance your loan to a lower interest rate, or a smaller period of time. Be sure to take into consideration the closing costs of refinancing, since they will cut into your savings.

You might also consider recalculating the amount of your mortgage and act as if you were refinancing your thirty year loan into a fifteen year loan. By simply making the larger payments, you can pay the loan off earlier without incurring any refinancing costs.

Paying more than the amount due also works as a cushion for when you have unexpected bills, or during times like the holidays when the bills are higher. Simply reduce the amount of the extra payment, and you can pay those other bills without dipping into your savings.

Pay Your Mortgage Off Early

By taking these steps, little by little, you will see that you can quickly and easily reduce the amount of your mortgage, and finally get rid of that mortgage payment. You will experience the true joy of home ownership, and have the freedom to choose what you want to do with your hard-earned money.

© 2011 Shasta Matova

More by this Author


Comments: Ways to Pay Off Your Mortgage Early 21 comments

Helga Silva profile image

Helga Silva 12 months ago from USA

Great hub. Paying off your mortgage early will free a large chunk of money you can use to enjoy your life.


B. Leekley profile image

B. Leekley 15 months ago from Kalamazoo, Michigan, USA

Your advice makes good sense.


Millionaire Tips profile image

Millionaire Tips 4 years ago from USA Author

Thank you khmohsin, I am glad this was helpful to you.


Millionaire Tips profile image

Millionaire Tips 4 years ago from USA Author

Thanks wheelinallover, most people have a hard time paying cash for a house since it is such a big amount and they want to start as quickly as I can. I think home-ownership makes sense no matter the economy, because you do need a place to live. If you own the home eventually you will have to stop making payments, but if you rent, you have to pay forever. You're right, especially if you budget for the taxes and insurance, those payments don't hurt at all.


Millionaire Tips profile image

Millionaire Tips 4 years ago from USA Author

Thank you jenbeach21 for your comment. I am glad you are working on paying off your debt. It is such a freeing feeling when you do. I bet you feel lighter already!


Millionaire Tips profile image

Millionaire Tips 4 years ago from USA Author

Thank you Mary for your vote, comment and share. Instead of worrying about refinancing and having to pay the bank and do more research, I simply treated my mortgage as if it was a 15 year loan, but simply paying more each month and even extra whenever I could. It doesn't have to be complicated. I hope this will help you get your mortgage paid off faster.


Millionaire Tips profile image

Millionaire Tips 4 years ago from USA Author

Thank you Linda! I appreciate your comment and your share.


khmohsin profile image

khmohsin 4 years ago from London,UK

Millionaire Tips

I was sorting same types of tips and trick for a long time. You hub eased my problems too much.

Keep it up with the same way. I am sharing these ideas with friends too


wheelinallover profile image

wheelinallover 4 years ago from Central United States

Even in today's economy home ownership still makes sense. There have been many times and places where it is cheaper to buy than to rent. Even if a house your buying loses value it is still "yours." You may have to pay for repairs, however you are not dependent on a landlord who never shows, other than to collect the rent.

I think a person becomes spoiled when they can and do pay cash for a house. For many this is a dream they never realize. In this case the best they can do is pay off their mortgage early. From personal experience I can say the taxes and insurance payments don't hurt as bad a house payment.


jenbeach21 profile image

jenbeach21 4 years ago from Orlando, FL

Very useful hub! We are working on paying off all our debt and I will keeping this in mind.


mary615 profile image

mary615 4 years ago from Florida

I have looked into paying off my house by making fewer payments, but just haven't gotten around to it. I have to go back and reread this Hub. I'm bookmarking for now. I will share. I voted this Hub UP.


Sunshine625 profile image

Sunshine625 4 years ago from Orlando, FL

Excellent tips MT! I'll keep them in mind and share them also! :)


Millionaire Tips profile image

Millionaire Tips 4 years ago from USA Author

Thanks mymoneywish - it is wonderful to not have to pay a mortgage. You still have to pay taxes and insurance, of course, but it does free you up to do many other things.


mymoneywish 4 years ago

@claptona - not sure I agree with you on leasing ... I think smart people BUY used to be honest. Paying the 25% depreciation for the "new car smell" does not make any sense to me.

@ MillionaireTips - thanks for this hub ... its definitely a dream of mine to stop making mortgage payments to the bank and anything that I can do to accelerate and bring closer that day is one that I only look forward to! Shared and you have a new follower.


Millionaire Tips profile image

Millionaire Tips 4 years ago from USA Author

That's a great plan Victoria Lynn. I have to say that having my mortgage paid off has given me a lot of freedom in my life choices. When I was unemployed, I didn't worry about becoming homeless, and the mortgage crisis doesn't affect me. Since my expenses are low, I was able to take chances to start a new business and spend some money doing things I enjoy like traveling. I wish you the best in paying off your mortgage early. You can do it. Thanks for linking to my hub and for your comment.


Victoria Lynn profile image

Victoria Lynn 4 years ago from Arkansas, USA

I am working on this. I had been paying aggressively, but I've had to slow down some. Still, I plan to be mortgage-free while still in my 40s. That's financial freedom to me. I can hardly wait. Great hub! I wrote one recently asking "Is buying better than renting?" I'm going to link your hub to mine to give people more information on mortgages and their value. I will pay off my home and always have a place to live. I don't want to rent to give my money to other people. I'd much rather invest it in my own property! :-)


claptona profile image

claptona 5 years ago from Earth

Well, what would you call the 11 million that are upside down in their homes?

15% a small number?

Or 1 1/4 % of home buyers get foreclosed on and it creates havoc worldwide for the financial sector.

One can never own their home outright. If you think you can, stop paying the taxes on it for a couple of years and see what happens.

What used to work for the individual investor is NOT true in the markets today.

If the banks allow their properties to go into foreclosure (Morgan Stanley is the LARGEST foreclose in Japanese history) do you think they know something that the average homeowner does not?

As for your car payment example - smart people lease vs. buying a car. It allows them to make smaller payments, it allows someone to take the depreciation on the car.

People who are not financially savvy buy cars, finance them through banks and make another one of the many bad choices that normal people make.

Tout home ownership, get behind the government and banks and push the idea of "Own a Home".

Just do not expect it to retain it's value for the next 10 to 20 years.

Cheers


Millionaire Tips profile image

Millionaire Tips 5 years ago from USA Author

Just like I continue to make my car payments, even though it is a depreciating asset, I make my mortgage payments. I don't borrow more than I can pay.

Yes, in a small number of cases, it might make financial sense to walk away from a mortgage, lose their home, and take the big hit on their credit rating. But the majority of people are not in that position.


claptona profile image

claptona 5 years ago from Earth

Hi Mill,

Houses right now are like cars - depreciating assets.

Going to go down further in value as the years go buy.

Why support the banks and government by buying into this scam of the "American Dream".

Give the house back to the banks, like the banks are doing with properties they own.

Bring down the Ponzi scheme - don't pay your mortgage!.

My 2 cents worth.

Cheers


Millionaire Tips profile image

Millionaire Tips 5 years ago from USA Author

Thank you Donna. You are right, it can save thousands of dollars.


DonnaCosmato profile image

DonnaCosmato 5 years ago from USA

Excellent advice that will save individuals thousands of dollars over the life of a mortgage! Voted up and useful.

    Sign in or sign up and post using a HubPages Network account.

    0 of 8192 characters used
    Post Comment

    No HTML is allowed in comments, but URLs will be hyperlinked. Comments are not for promoting your articles or other sites.


    Click to Rate This Article
    working