One of my BIGGEST goals right now is to pay off the mortgage. I won’t lie, it’s sooo hard to stay motivated when you’re chipping away at such a big number, but the benefits are just way too huge to ignore. It’s a critical element of financial freedom, peace of mind…and of course, more disposable income.
But the reality is that if you prioritize getting it paid off, it CAN and WILL happen. And your future self will thank you for it!
Related post: 10 Things I’m Doing to Pay Off My Mortgage Early (and the One Thing I Won’t Do)
So if you’re in the same boat as me, consider these different ways for paying off your mortgage way earlier than you ever expected:
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Automatic payments are the simplest, easiest, and most foolproof way to pay off the mortgage early. In addition to automating your regular monthly payment, make sure you automate an extra principal payment – even if it’s just an extra $25 a month! Starting small is really, really important because it gets you into the habit, it DOES add up, and eventually you forget you’re even doing it. Then it will be easy to add another $25, making your monthly payment $50, and so on and so forth. Automating payments is really important for any and every financial goal, so do this no matter what!
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When you purchased your house, you were most likely given the option to set your mortgage up to be paid bi-weekly instead of monthly. If you were like us, you said “umm, I think I’ll just focus on this massive monthly bill I’ve just adopted, but thanks!” Or maybe you didn’t even know it was an option. Regardless, this is an adjustment that most major banks will let you make at any time – and it can have a very profound affect on your mortgage principal.
The brilliance of bi-weekly payments is this: By paying half of your monthly mortgage every two weeks (which for most of us aligns with our paychecks anyways), you end up paying for an extra mortgage payment every year…but your budget really doesn’t feel it since you’ve aligned the payments with your paycheck cycles. With one extra payment a year going entirely towards the principal, you will cut entire years off of your loan! That’s a big deal….especially when you combine it with all the other tactics you can employ.
This is one of my favorite “freebie” ways to pay off the mortgage early and, in my opinion, one of the greatest discoveries I’ve come across.
We’re all used to racking up credit card points for a variety of purposes (travel, shopping, cash back), BUT for some reason one of the lesser known options is to get a card that automatically converts all of those points into mortgage principal payments.
This is a huge opportunity!
First, let me elaborate on the importance of these points converting automatically. This is one less thing that can be screwed up by our brain second-guessing, forgetting, or just losing interest. When points are converted automatically, every single month a little extra bit of your principal is bitten off by your normal, everyday shopping habits. And it all happens in the background while you focus on other things!
This is just another fabulous Set-It-And-Forget-It way to help yourself pay off that darn mortgage.
Even though regular, recurring payments are the foolproof way to pay off your mortgage early, putting occasional lump sums towards the mortgage may give you the biggest bang for your buck. Not only will it bite a big chunk off what you owe, it will also give you some amazing motivation because it will be enough to actually see!
The key is to commit to putting a portion of any lump sum you receive directly towards the mortgage. This means birthdays, bonuses, and tax returns. Any time you come into a sum of money, send a portion of it straight to your mortgage!
Depending on what kind of mortgage you took out, you may or may not have had to get private mortgage insurance (PMI). Usually PMI is tied to loans that require putting less than 20% down and it costs close to $100 a month (if you have PMI, it is wrapped up in your mortgage).
You should call your bank to find out what has to happen to get rid of PMI, but usually it goes away after you’ve paid off 20% of the loan and/or paid it for 5 years. Once that’s done, just keep putting that money towards the principal! You’re already used to paying that much every month, so there’s no reason to not just reallocate it towards the principal.
Every. Single. Time. Don’t even give yourself a chance to experience more money coming in. Whatever your raise amount is, send it straight towards the principal. This will not only help to get the mortgage out of your way, but it will help you to appreciate what you have and live below your means. For most of us, our spending grows in direct proportion to our income, which means our raises don’t necessarily contribute to our long-term goals! Don’t let that be you.
Refinancing isn’t always the best decision for everyone, but what is nice is that you can run the numbers ahead of time and know exactly whether or not you’ll be saving money. If you have a high interest rate on your current mortgage, then this could save you a bundle. One of the best things you can do when you refinance is to try and get a 10- or 15-year mortgage instead of a 30-year mortgage. Even if you’re paying a little more each month, if you’re cutting a decade off your loan, you’re saving yourself a ton of money and time!
Extra deposits, automation, and credit card points are easy to set up, but the next big step is actually finding more money so you can increase the amount you’re putting towards your principal. There are a ton of ways to do this (some easier than others) but if you’re really motivated to pay off your mortgage, you’ll most likely be motivated to take some of these steps too.
Side Income Ideas
Even though you can come up with a lot of money by saving and adjusting your lifestyle, nothing is as exciting (or as important) as finding a fun side income source….especially since there’s basically no limit to how much you can earn! There are tons of ways to earn extra money and they DON’T have to involve getting an extra job that you’re not thrilled with. Nowadays you can make money doing what you love…which means it won’t feel like work. And of course, the key is to put this extra money towards your mortgage!
Here are some great resources for side income ideas:
- How to Start a Money-Making Blog (does it surprise you that this is my favorite?? ;-))
- How to Turn Your Hobby into a Money-Making Machine
- How to Make Extra Money from Vacation Photos
- 10 Ways to Make Money as an Online Educator
- The 5 Best Ways to Make Money on Zazzle
- 50 Ways to Make Money as a Stay at Home Mom
Ideas for Cutting Back
At first, cutting back on what your spending is intimidating and discouraging. No one wants to give up something, especially when you already feel like you ARE cutting back. But once you get going, you’ll realize that it’s actually not that difficult. And if you’re doing it right, it’s actually really exciting and fulfilling. Just remember that you’re not actually giving something up. You’re exchanging it for something even better – in this case, paying off that mortgage and living debt free.
Related post: 6 Things You Need to Stop Paying For
There are endless ways to cut back on what you’re spending, but here are some great places to start:
Food spending. Aside from the mortgage, you’re most likely spending the most money on food. It’s crazy how quickly that can add up! Try your best to give up eating out and opt for frozen pizzas instead of delivery. If you’re ready to tackle your grocery bill, I have a great post that details how I cut $500 from my monthly grocery bill – it’s worth the read! Being able to put hundreds more towards your mortgage bill each month will have an enormous impact.
Don’t buy anything for 24 hours. No matter what it is you want to buy (unless it’s an emergency), don’t let yourself do it for 24 hours. You will be shocked how many things you don’t actually need – or really even want – when you let the initial excitement wear off a bit. Companies have mastered the art of the impulse purchase, so they know how to make us think we need something. Waiting not only prevents needless purchases, but it also gives us a chance to find a good deal.
Unplug appliances that you don’t really need. We saved a whopping $100 a month on our electric bill by unplugging the extra fridge we had in the basem*nt!
Lifestyle Adjustments
Lifestyle adjustments are my absolute favorite way to find extra money. It’s somewhat similar to just plain old saving, but a thousand times better because you’re basically not giving anything up. You just examine all the ways you’re spending money and see if there are easy ways to get the same thing, but cheaper. There are endless ways to do this, but here are a few obvious ones:
Insurance Policies. For some types of insurance (like car insurance), your rates can go down over time, but you need to “opt in” to actually lower the rate. A simple phone call, or even just logging into your account online, might be all you need to do to get a lower rate for the exact same policy.
Cable. Cable companies suck us dry. Every person on your block is paying a different rate – except for the smart people who have given up cable completely. There are two ways you can save serious money with cable. The first is the same with insurance – call them up and ask if there’s a better rate. The other is to cancel cable completely and instead put your money towards other sources of TV and movies like Netflix, Sling TV, or Amazon Prime (you can now subscribe month-to-month to premium channels like HBO, Showtime, and Starz through Amazon Prime! If you want to give it a try you can get a free trial here → Amazon Channels Free Trial). For how much you likely spend on cable, you’d be surprised how much you can get (and save) by mixing and matching from other entertainment sources.
Automate the temperature of your home. Pretty much every thermostat you get these days will give you the ability to set timers that automatically adjust the temperature of your house. When you’re not home, no need to heat or air condition! Night times can usually be cooler and day times a little warmer. You’d be surprised how much you can save every single month by spending 10 minutes configuring your thermostat.
Hopefully these tips end up being helpful! I’d love for everyone to be able to pay off their mortgage early and change the way we look at debt. 🙂 Let me know if you have any more tips for getting the mortgage paid off! I’d love to hear them!
You may also be interested in:
- 6 Books that Will Help You Retire Early
- How I Cut $500 Off My Monthly Grocery Bill
If you’d like more tips on saving & making money, getting out of debt, and reaching early retirement, subscribe to my Financial Freedom Mailing List for notification of new posts. Thanks for your time!
7 Comments on How to Pay Off the Mortgage Early
Can you tell me the process to pay through credit card rewards? Never heard of it before and more interested in knowing more about it.
Paying through credit card rewards is really, really simple. The only catch is that your bank needs to offer the credit card option. So if your loan is from one of the big lenders like Wells Fargo, then you are in good shape. If it’s a smaller bank, then you may need to check with them to see if they offer something. Once you set up a credit card with your bank, everything will just happen automatically! It’s the whole point of the credit card, so you don’t have to do anything special.
I’ve never done this but you can probably shop around for a new insurance quote too. I think so many of us just stick with the original quote.
These are some great ideas to pay off the mortgage early and I especially like the bi-weekly payments.
These are all great ideas, and we’ve used many of them to help pay down our mortgage too. It’s so fun to have friends doing the same – Yay!! We’ve found that a good way to pay down our mortgage while still keeping a cushion in the bank for much of the year is to use a system of both additional monthly principle payments AND setting aside an additional amount each month into a separate bank account. At the end of the year if no catastrophes have happened (hasn’t occurred yet) then we happily dump that lump sum onto the mortgage. It’s fun to get to watch the mortgage disappear slowly throughout the year and then get an extra boost after the holidays 🙂
Hey. Thanks for the tips. Question. If I get paid at the end of every month, how would it help me to set up by-weekly payments? How do you end up paying for an extra mortgage payment every year by doing so?
The reason that biweekly payments end up paying for an extra mortgage payment is that there are more weeks in the year than just the 4 per month that we typically think of. So if you are paid at the end of the month, you would actually have two months were you are paying an extra half-payment. If you can budget it for those months, then you should still totally do it! When paychecks come in biweekly, there end up being 2 months out of the year where you actually get 3 paychecks, which makes it much easier to pay those two extra half-payments.
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