Paying Off Your Mortgage Early: A Simple Way to Save Big

If you’re a homeowner looking to save thousands of dollars, paying off your mortgage early is always an option — but is it worth it? We’ll help you calculate how much you could save, review the trade-offs you could be making, and cover seven strategies you can use to pay off a mortgage early.

How to pay off your mortgage faster: 7 simple strategies

1. Make biweekly payments

Split your monthly mortgage payment in half and make biweekly payments instead. At the end of a calendar year, you would’ve made 26 half payments (since there are 52 weeks in a year) — which equals 13 full payments — instead of the 12 you’d normally make. You could shave about four years off of a 30-year loan term with this method.

Don’t forget to tell your lender to apply all extra payments toward your principal balance, not interest. You may have to make a request in writing or follow a special process when sending in extra principal payments. (And if you run into any issues with payments being promptly and correctly credited to your account, here’s what you should know about your rights as a borrower).

2. Round up your minimum payment

Try rounding your minimum payment up to the next $100. For example, if you owe $1,015 on your mortgage each month, pay $1,100 instead. Even better, pay $1,200 monthly if you can comfortably afford it.

3. Recast your mortgage

If you have a lump sum, such as $5,000 or $10,000, consider a mortgage recast. You’d pay the money to your lender to reduce your loan principal and recalculate your mortgage payments. Your term won’t change, but your new payments would be lower, giving you room to pay extra toward your principal as frequently as possible. A recast can be a good alternative to a refinance, as you’ll be paying fewer fees. A recast isn’t allowed for those with FHA or VA loans, but you can still get ahead by using your lump sum to make extra mortgage payments.

4. Refinance and maintain your old mortgage payment

If you qualify for a mortgage refinance to get a loan with a lower interest rate and monthly payment, keep making your original payments to pay off your mortgage faster. Refinancing may be more appealing to those borrowers with a higher mortgage rate, because the amount you stand to save will likely outweigh the costs and fees that come with a refinance.

5. Use bonuses, refunds and other windfalls

Whenever you get a bonus from work, an income tax refund or another financial windfall, put that extra money toward paying down your loan principal.

6. Make 1 extra payment each calendar year

You can also combine one or more of the methods above with making one additional payment each year. For example, if you pay biweekly, plus make an extra full payment, that’s 14 full payments you’d make each year.

7. Reduce your expenses and put the money toward your mortgage

Depending on how quickly you want to pay off your mortgage, you may need to reduce small, recurring expenses or target the biggest ones in your budget. This could look like cutting down on dining out and canceling a few streaming subscriptions or downsizing your home — choose the lifestyle changes that’ll help you meet your financial and quality-of-life goals.

Is there a penalty for paying off a mortgage early?

Some lenders impose penalties for making “extra” payments or paying off your mortgage early, so remember to check with your mortgage company before you launch off on prepaying your mortgage.

You can check whether there are any prepayment penalties included in your loan terms by locating Page 1 of your closing disclosure.

Benefits of paying off a mortgage early

 Saving money on interest. The more time you spend paying down your mortgage, the more you’ll pay in interest. For example, if you take out a $350,000 loan with a 6.75% interest rate and a 30-year term, you’ll pay a total of $467,233.60 in interest alone. That’s money you can’t put to work to meet other financial goals.
 Getting rid of your biggest monthly payment. Your mortgage is likely the largest monthly expense you have. If you plan to stay in your home for the long haul, getting rid of your monthly mortgage payments sooner means you can unlock more disposable income to bulk up your savings or retirement funds, invest in stocks or cover other expenses with cash rather than credit.
 Having security and peace of mind. There’s real security in owning a home free and clear. As long as you still owe a balance on your mortgage, there’s the possibility you could lose your home to foreclosure if you ever default on your payments. Although you’re still responsible for property taxes and homeowners insurance after your mortgage is paid off, knowing you no longer have a loan against your home can be a huge stress reliever.

Drawbacks of paying off a mortgage early

 Draining an emergency fund. Paying extra on your mortgage isn’t wise if you don’t have an emergency fund set aside for when life dishes out the unexpected. Having at least three to six months’ worth of living expenses in an immediately accessible account can turn a financial nightmare into just a speedbump. How? An emergency fund that helps you meet your needs in an emergency can make it possible to avoid taking on new debt when big expenses pop up.
 Losing a major tax incentive. One perk the IRS offers to those paying down a mortgage is the mortgage interest deduction, which allows you to deduct interest payments from your taxable income each year. If you’re not making mortgage payments, there won’t be interest to deduct, so it’s worth considering how your taxes will be impacted if you itemize your tax deductions.
 Falling short on retirement savings. If there’s room in your budget to boost your retirement savings, prioritize that first. This is especially important if your employer offers a matching contribution — that’s essentially free money that shouldn’t be left on the table.

Is it worth paying off your mortgage early?

If you’re trying to decide whether to pay off your mortgage early or pursue other goals instead, you can — and should — run the numbers.

Use a home loan calculator to determine how much you’ll save in interest by paying off the mortgage early. Then, see how those savings stack up against the return you’re likely to make from pursuing whatever alternative goals you have in mind.

That return could be an actual dollar amount or something priceless — like checking off items on your bucket list or supporting a family member in need — but, either way, only you can really assess how important it is to you.

How to calculate paying off your mortgage early

A mortgage payoff calculator is the best way to nail down the math of paying off your mortgage early. Here’s what you’ll need to know about your home loan to calculate your early payoff:

• Current loan balance: The amount of money you still owe on your loan.
• Remaining term: How many months it’ll take to pay off your loan if you stick with your current payment schedule.
• Interest rate: The percentage of the principal you pay each year as a fee for borrowing the money.
• Extra payment start date: The date you’ll start paying extra on your monthly payments.
• Target payoff date: The date you hope to have finally paid off the loan.

Should I tackle high-interest loans before paying off my mortgage early?

Generally, it’s going to make sense to attack your high-interest debt before prepaying your mortgage.

The average credit card APR was 21% at the end of 2024, according to a LendingTree analysis using data from the Federal Reserve. That’s a hefty price to pay for simply borrowing money, and can put a big strain on your monthly budget. Americans put an average of $1,597 toward their debts each month, according to a recent LendingTree survey — yet around 35% of us have less than $100 left after paying our monthly bills.

Takeaway: Clearing high-interest debt first, before you try to pay off your mortgage early, can ease a lot of financial stress.

Should I pay off my mortgage early or invest?

Although you’ve likely heard that mortgage rates are high right now, compared to credit card or personal loan debt, mortgages really aren’t “high-interest.” So while it may seem counterintuitive, in many cases you’re better off sticking with the scheduled mortgage payments and using your extra funds to invest.

Example calculation: Mortgage payoff vs. investing

Let’s say you have a 30-year mortgage for $350,000 at a 6.75% interest rate, and you’ve owned the home for five years. If you continued to pay your mortgage as scheduled, you would pay $467,234 in interest over the 30 years. If you put an additional $300 toward the mortgage each month, though, you would save $99,222 in interest and pay off the mortgage six years and one month earlier.

Sounds hard to beat, right? But, if you were to put $300 a month into an index fund for 30 years, you could expect to make more than $450,000.

Takeaway: Don’t assume that paying off your mortgage early instead of investing will save you money overall.

Choosing your next steps

If you’ve decided that paying off your mortgage is the best option for you, and you’ve confirmed that there are no prepayment penalties in your loan terms, you just need to choose a strategy that makes sense for you. Congratulations — you’re getting rid of a huge monthly bill and building a substantial amount of home equity in choosing to pay off your mortgage early.

If, on the other hand, you decide to stick with your scheduled mortgage payments, make a concrete plan for how you’ll use the extra money that won’t be going toward the mortgage. It may be tempting to treat it like spending money, but bulking up retirement accounts, an emergency fund or long-term investments will likely better serve your financial goals.