How to Pay Off Your Mortgage Early

You guys, there’s nothing like the feeling of your home’s grass under your feet when the bank doesn’t own it anymore. Not only is there huge freedom in paying off your mortgage early, it’s also a great way to build wealth. In fact, the average millionaire pays off their house in just 10.2 years, according to Ramsey Solutions’ National Study of Millionaires (see Baby Steps Millionaires). If you’re ready to pay off your mortgage early, I’ll walk you through exactly what it’ll take.

When Should I Start Paying Extra on My Mortgage?

You should only work toward paying off your mortgage early when you reach Baby Step 6—not before. That’s right, there are other Baby Steps you need to prioritize ahead of getting rid of your mortgage. Do these first:

• Pay off all your consumer debt—think credit cards, car notes and student loans (Baby Step 2).
• Build an emergency fund worth 3–6 months of your typical expenses (Baby Step 3).
• Invest 15% of your income for retirement (Baby Step 4).
• Start saving for your kids’ college fund—if you have kids (Baby Step 5).

If you haven’t checked all four of those boxes, then that’s where you should focus your attention for now. But if you have accomplished those goals, you’re ready to start taking steps toward paying off your house early. Exciting!

How to Pay Off Your Mortgage Faster: 5 Tips

Here are five not-so-secret but super helpful tips for paying off your mortgage early:

1. Make extra house payments.

2. Make extra room in your budget.

3. Refinance (or pretend you did).

4. Downsize.

5. Put extra income toward your mortgage.

How Would Extra Principal Payments Affect My Mortgage Payoff?

It’s like a fast-forward button for your debt-free date. Every dollar you throw at your mortgage payment puts a bigger dent in your principal balance. And that means if you make just one extra payment annually, you’ll knock years off the term of your mortgage—plus save thousands of dollars in interest.

How does that work? Let’s crunch the numbers. We’ll say you have a $240,000, 30-year mortgage with a 6.5% interest rate and a monthly payment of $1,500 for your principal and interest. If you made an extra payment just once every quarter, you’d pay off your house 14 years early! That would mean cutting the length of your mortgage almost in half and saving a whopping $160,000 in interest along the way.

If you want to see how much time and money you’d save making extra house payments in your specific situation, check out our free Mortgage Payoff Calculator.

But before you start making those extra payments, let’s go over some ground rules:

• Check with your mortgage company first. Some companies only accept extra payments at specific times or may charge prepayment penalties.
• Include a note on your extra payment that you want it applied to the principal balance—not to the following month’s payment.
• Don’t get suckered into paying a company for a fancy-schmancy mortgage accelerator program—you can set up biweekly payments yourself for free (more on that below).

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How Can I Find Extra Money in My Budget for My Mortgage?

The best way to find extra money for your mortgage is to use EveryDollar, the budgeting app built by Ramsey to help you find margin in your monthly spending.

To start making a budget every month, write down your income, list your expenses, subtract your expenses from your income to make sure you aren’t overspending, then track your spending during the month to make sure you’re staying on target.

If you are living on a budget—or once you make your first one—here are some adjustments you can make to free up money for paying off your house early.

• Lower your grocery budget. Chances are, groceries are one of the biggest line items on your budget aside from housing—especially if you have a family. So think about some ways to cut back, like changing stores or shopping sales and in-season produce.
• Stop eating out so much. Okay, I’ll admit this is a tough one for me because I love eating out. But going to restaurants is always more expensive than cooking at home—sometimes a lot more expensive. Cooking at home just 2–3 more times per week can save you a ton in the long run.
• Do an insurance coverage checkup. An independent insurance agent who can shop rates from multiple providers may be able to get you a cheaper price than what you’re currently paying for your coverage. You can start that process by connecting with a RamseyTrusted^® pro.
• Cancel some subscriptions. These days, it’s super easy to rack up more streaming services than you actually use. Figure out which ones you can live without, cancel them, and put the extra cash toward your mortgage.
• Cut back on online shopping. I know, I know . . . Online retailers like Amazon are super convenient with two-day shipping and one-click ordering, but all those orders can add up fast. And if we’re really honest with ourselves, we probably know we don’t need all that stuff in our digital cart. (Dang it!) Cutting back will give you margin to make bigger payments on your mortgage each month.

Should I Refinance My Mortgage to Pay It Off Faster?

Refinancing could be a good move if it significantly lowers your interest rate and you switch from a 30-year loan to a 15-year fixed-rate loan. But only if the math works in your favor.

Let’s see how this would affect our earlier example—a 30-year $240,000 mortgage with a 6.5% interest rate. If you kept the 30-year mortgage and made all your payments on schedule for those three decades, you’d pay about $306,000 in total interest over the life of the loan. But if you switch to a 15-year mortgage with a lower rate of 6%, you’ll save close to $182,000—and you’ll pay off your home in half the time!

Sure, a 15-year mortgage will come with a bigger monthly payment. But if you can comfortably fit it within your monthly budget (meaning the payment is within 25% of your take-home pay—including principal, interest, property tax, home insurance, private mortgage insurance and homeowners association fees), it’ll totally be worth it. And don’t forget, you’ll likely have boosted your income or lowered your cost of living from the time you first took out your mortgage—in that case, you’d definitely be able to handle the bigger payment.

If you want to refinance to a mortgage you can pay off fast, talk to an expert at Churchill Mortgage. Our team at Ramsey has worked with Churchill Mortgage for years, and their mortgage experts will show you the true cost—and savings—of each loan option. They’ll also coach you to make the best decision based on your budget and goals.

If you already have a low interest rate on a 30-year loan, don’t worry about refinancing. Go ahead and treat your 30-year mortgage like a 15-year mortgage by upping your monthly payment.

Should I Downsize My House to Pay Off My Mortgage Faster?

Downsizing to a smaller, less expensive home frees up cash you can throw straight at what’s left of your mortgage.

Downsizing your house may sound like a drastic step. But if you were already thinking about moving and you’re determined to pay off your mortgage faster, consider selling your larger home and using the profits to buy a smaller, less expensive house.

With the profits from selling your bigger house, you may be able to pay 100% cash for your new home. But even if you do have to get a small mortgage, you’ll still reduce your debt and wind up with lower payments.

Remember though: Your goal is to get rid of that new mortgage as quickly as possible. So use the smaller balance and lower payments you get from downsizing to accelerate paying off your home. This isn’t an excuse to pocket money in the short-term and delay your payoff.

If you think downsizing your house makes sense for your situation and you’re ready to get the process started, your next step is to find a trusted real estate agent who can help you sell your current house and buy a new one.

You can find one in your area through our RamseyTrusted^® program, which matches you with pros our team has vetted to make sure they understand how important it is to buy a home you can afford. They won’t pressure you to consider homes that’ll bust your budget.

Should I Put Bonus Income Toward My Mortgage?

Treating raises, bonuses and other income boosts as extra mortgage payments—instead of a new standard of living—gets you to a paid-off house faster.

You know what a lot of people do when they start making more money from a raise, promotion or bonus? They start spending more money, and it can happen automatically if you’re not paying attention. This is a sneaky little trend called lifestyle creep.

It’s not surprising that so many fall into that trap, since it’s really tempting to see extra income as an opportunity to spend more. But if you want to pay off your house early, one of the most effective steps you can take is to treat your income boosts as chances to save more.

To get really intense about knocking down your mortgage payment, put all your extra income toward your home loan. That means bonuses, raises, profit sharing, holiday gifts—yep, all of it. It’s more than okay to treat yourself from time to time (I still want you to enjoy your money for other things), but don’t let the temptation of lifestyle creep take over.

One of my favorite Bible verses, 1 Timothy 6:6 (NIV), teaches that “godliness with contentment is great gain.” If you keep an attitude of contentment, you won’t need to increase your lifestyle to feel joy and satisfaction about where you are in life—you’ll already have it.

And in this case, your “great gain” could wind up being the opportunity to pay off your mortgage faster.