Today, I’ll talk about the tips to pay off our mortgage early. Paying off your mortgage early is a way to avoid paying as much interest over the life of your loan. The sooner you start making extra payments to the mortgage principal, the more money you can save on paid interest. Many people debate that it’s better to keep the debt and instead invest that money. There are plenty of sites that go over the different scenarios, so I won’t get into that. I’ll just say that I wish I had started paying to principal earlier with our second mortgage. We paid off our mortgage in 6-1/2 years. 

Buy a home well within your budget.

There are many different rules out there for this but generally, no more than 25-28% of your take-home pay should be to the mortgage. The home we bought was well within our budget. We actually only budget based on one salary. This worked out well for us because 11 months after moving in, we actually started to live off of one salary. This allowed us to still be able to pay extra on the mortgage even on just one income.

Refinance your mortgage if you can find a better rate that will save your money.

There are calculators out there to help you with this. I refinanced my first home because better rates were available. This saved money for me in the end since I was in that home for many years after that. With our second home, I did a mortgage recast. A recast did not save us money, but it didn’t cost us money either. Basically, by putting down a lump sum we did a recast on our mortgage to the original payment terms ( so the mortgage went back to the original end date). However, this meant that the amount we owed each month decreased substantially. We still maintained the same amount of home equity.

Why did we do this? I went back and forth for a few months about whether to do this one or not. However, making that lump sum payment made our mortgage 60% paid! Then, I kept paying the same amount extra, plus the difference between the recast mortgage payment and my original payment. So, I kept the intensity. We wanted financial freedom.

What was the point of the mortgage recast though? Well, with a lower monthly mortgage amount, this meant that I needed less money in my emergency fund. Since my monthly expenses went down, I could then in turn part with more cash!

Create a zero-based budget each month.

Every single month I look at the budget and look at what expenses are upcoming. There are my standard expenses but then, of course, each month is different and at times my income would vary. So, the amount extra I have would vary each month. Then, I see how much extra I could send to the mortgage to get the budget to 0. This means that every dollar is assigned a purpose for the month. Check out my post on creating a basic budget.

Pay any extra money to the mortgage principal.

It is important that you pay extra to the principal and not accidentally prepay your payments. I was accidentally prepaying my payments on my first home. Every time I would get a bill, I would pay it. I didn’t realize that as soon as I paid for the next one, another came right after it. It took me a few months to realize that I needed to pay that money to the principal as I was getting statements for months ahead of what was due! 

On my statement, there was a place for me to write in the amount I wanted to pay additional to the principal, and I also wrote “to principal” on my checks. When I transitioned to online payments, there was a similar functionality. So, be careful with how you enter the payment online or on your paper form.

Make mortgage principal only payments.

If I had extra money at the end of the month and I already paid the mortgage, I would make principal-only payments using the online platform so that it would apply before the end of the month. Mortgage interest on my loan was calculated on the first of each month.

Make extra principal payments with bonus money.

Anytime that I got a bonus, that bonus quickly went to the mortgage! This was a quick way to debt reduction.

Use extra paychecks to make payments to the mortgage principal.

For me, biweekly paychecks equate to two extra principal payments a year. Since I get paid every two weeks, this means that twice a year I get three payments in one month. Since I budget monthly, this means that there are two times in the year when my paycheck went straight to the mortgage. I call these my “money months”.

Make extra principal payments with any tax return money.

If you get a tax return, it’s very tempting to spend that money on fun things. We used our tax returns to help pay off the mortgage. Our returns weren’t huge as we try to get close to zero but anything extra we put down on the mortgage.

In fact, make extra principal payments with any extra money!

One thing that helped us was we used the stimulus money we received during the COVID-19 pandemic to make a large principal payment to the mortgage! Any extra money is helpful. 

Here are some ways I found extra money:

• Consigned clothes
• Sold stuff on Facebook Marketplace
• Planned meals each week
• Shopped for food in bulk to get discounts

Read my post “8 Quick Ways to Reduce Spending“ to learn some tips to free more cash in your budget. 

I found a group of like-minded individuals who were also paying off their mortgages.

Finding like-minded individuals helped keep me motivated by being part of a community. There wasn’t anyone in my life who was doing what I was doing, so the support was wonderful! Each month I would post my accomplishments to the group and we would celebrate each other’s successes.

I used mortgage payoff chart trackers!

I had visual trackers on my walls that I colored in. Each block represented $500. It was hanging in my kitchen as a constant reminder! Each time I paid off $500 of the principal I would color that in. Toward the end, I had chains that I ripped for each $500 in principal amounts. The kids got involved with this one!

I used a mortgage payoff app to see how much interest I saved each month and over the life of the loan.

You can pay off your mortgage!

Trust me, you can do this. I remember when I was paying off my student loans and everyone told me it was impossible. Guess what, I did it. And, I paid off my mortgage. Remember to find a community to help you through this journey. The power of community is incredible.

Thanks for reading! Are you working to pay off your mortgage? Leave a comment below.

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