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Pay Off Your 30-Year Mortgage in Just 15 Years With These Tips

The Benefits of Paying Off Your Mortgage Early

Paying off your mortgage early has some major benefits. For starters, you’ll save a ton of money in interest charges. On a typical 30-year mortgage, nearly two-thirds of your payments go toward interest. Pay it off in 15 years instead, and you’ll save over $100,000 in interest on a $250,000 loan.

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1. Make Extra Principal Payments

Send in a little extra with each payment, like an extra $50 or $100. Even small amounts will slash the total interest you pay and take years off the loan. You can also make lump sum payments when you have extra cash, like from a bonus at work or tax refund. Every dollar you put toward the principal reduces your balance and shortens the life of the loan.

2. Pay Biweekly Instead of Monthly

Making payments every two weeks instead of once a month results in one extra full payment each year, reducing your term by years and saving thousands in interest charges. This simple step requires almost no effort but provides a huge payoff.

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3. Refinance at a Lower Interest Rate

If interest rates have dropped since you got your mortgage, refinancing to a lower rate could help you pay the balance off faster. You’ll pay less in interest each month, allowing more of your payment to go toward the principal. Compare refinancing costs to interest savings to make sure you’ll come out ahead.

4. Make Extra Payments a Priority

Paying off your mortgage early takes discipline, but the rewards are well worth it. Make it a priority in your budget and find expenses you can cut or ways to earn extra income to put toward your mortgage. Once it’s paid off, you’ll have a huge sense of accomplishment and more financial freedom than you’ve had in years. The best part? Your home will truly be yours.

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How to Calculate Your Mortgage Payoff Date

To figure out your new payoff date, you’ll need to do some number crunching.

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First, log into your mortgage account and find your current principal balance, interest rate, and remaining term. For this example, let’s say you have a $200,000 mortgage at 4% interest with 29 years left.

Next, determine your current monthly payment. In this case, it’s about $1,013. Then, calculate what your new payment would be if you paid it off in 15 years instead. A mortgage calculator shows $1,610 would pay off $200,000 in 180 months.

Now, subtract your current payment from the new one to get the amount of your additional principal payment: $1,610 – $1,013 = $597. Pay this each month in addition to your regular payment.

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Make biweekly payments if you can. This means paying half your monthly payment ($805) every two weeks instead of the full amount once a month. You’ll make an extra full payment each year, reducing your term by a few years.

Look for ways to increase your income or cut your budget so you can put more towards your mortgage. An extra $100 or $200 a month can shave years off the life of your loan.

Stick with it and stay motivated by tracking your progress. As your balance drops quicker, it will inspire you to keep chipping away at the debt.

Strategies to Pay Extra Towards Your Mortgage Principal

To pay off your mortgage in just 15 years, you’ll need to make additional principal payments each month. Here are some effective strategies to pay down your mortgage faster:

1. Make biweekly payments

Instead of your standard monthly payment, pay half the amount every two weeks. There are 26 biweekly periods in a year, so making payments this way means you’ll make 13 monthly payments each year equivalent to one extra full payment. This can shave years off your mortgage.

2. Increase your monthly payment

If possible, increase your monthly payment by at least 10 to 15 percent of the regular amount. The more you can increase it, the faster you’ll pay off your mortgage. Even increasing by a small amount, like $50 or $100 a month, can make a big difference over 15 years.

3. Pay more when rates decrease

If interest rates drop on mortgages, use the money you’re saving from the rate decrease to pay more towards your principal balance. For example, if rates drop and you’re saving $50 a month, add that $50 to your monthly payment. This is an easy way to pay extra without impacting your budget.

4. Make annual lump sum payments

If possible, pay one extra mortgage payment each year in the form of a lump sum. To do this, save up money each month so that at the end of the year you have enough to make one full extra payment. Pay this directly towards your principal balance for the biggest impact. Even paying a portion of an extra payment, like $3,000 to $5,000 a year, can help significantly.

The key is to pay at least a little bit extra whenever you’re able to. Making additional payments, no matter the amount, is the surest way to pay off your mortgage years ahead of schedule. Stick with it and before you know it, you’ll have paid off your 30-year mortgage in just 15 years.

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Refinancing to a 15-Year Mortgage

Refinancing your 30-year mortgage to a 15-year term is one of the fastest ways to pay off your home loan early and save thousands in interest charges.

1. Lower Interest Rate

Interest rates for 15-year mortgages are typically lower than 30-year mortgages. This means more of your payment will go toward principal each month, allowing you to pay the loan off in half the time. Even shaving just 1% off your rate can save you a bundle over the life of the loan.

2. Faster Payoff

With a 15-year mortgage, you’ll make 180 payments instead of 360. Each payment will be higher, but you’ll build equity faster since more is going toward principal. In many cases, homeowners are mortgage-free 10 to 15 years sooner.

3. Save on Interest

Interest charges are front-loaded on mortgages, so the bulk of what you pay in the early years is interest. By shortening your term, you’ll pay far less interest overall. For every $100,000 borrowed, you could save $50,000 or more in interest with a 15-year mortgage versus a 30-year.

4. Disciplined Payments

The higher payments required for a 15-year mortgage instill discipline. While it may be a budget stretcher, many find that they adjust within a few months. Knowing you’ll be mortgage-free sooner can provide motivation to cut other expenses to make it work.

5. Consider a Refi

If your current mortgage allows for it, you may be able to refinance it to a 15-year loan. This can be an easy switch if rates are low and you have enough equity in your home. Meet with your lender to explore your options and see if refinancing to a shorter-term mortgage makes sense based on your goals and finances.

Lifestyle Changes to Help Pay Off Your Mortgage Faster

Here are some tips to cut years off your repayment term:

1. Spend Less and Pay More

Look for expenses you can reduce or eliminate, like eating out, entertainment, and hobbies. Put the money you save towards extra mortgage payments. Even small lifestyle changes can make a big difference over time. Paying an extra $50 or $100 each month on your mortgage means thousands less in interest charges and years shaved off the loan.

2. Make Biweekly Payments

Instead of the typical monthly payment, pay half the amount every two weeks. There are 26 biweekly periods in a year, so you’ll end up making an extra full payment each year. This simple step alone can cut 3 to 5 years off a 30-year mortgage.

3. Refinance at a Lower Interest Rate

Interest rates change over time, so if rates have dropped significantly since you got your original mortgage, you may be able to refinance at a lower rate. Look for “no-fee” or “no-cost” refinance options to avoid paying thousands in closing costs. A lower rate means less interest and a shorter repayment term.

4. Pay Yearly or Semi-Annual Bonuses Towards the Mortgage

If you receive an annual bonus at work, put all or part of it towards your mortgage principal. The more you pay down the principal, the less interest you pay and the faster you pay off the loan. Any windfalls, like an inheritance or side income, should also go straight to the mortgage.

5. Make Extra Principal Payments

In addition to increasing your regular payments, pay extra when you’re able to, like quarterly or when a CD matures. Even small, irregular amounts paid towards the principal help shorten the lifespan of a mortgage significantly. Paying an extra $25, $50 or $100 whenever you’re able adds up to thousands over the years.

Conclusion

The road to being mortgage-free in 15 years requires discipline and commitment, but taking control of your repayments and expenses can help make it a reality. Making regular extra payments, reducing your interest charges, and cutting unnecessary costs are all effective ways to pay off your mortgage ahead of schedule.

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