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11 Strategies for Paying Off Your Mortgage Early (That Actually Work)

Paying off your mortgage early can give your budget more breathing room.

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Updated Oct. 5, 2024
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Paying off your mortgage ahead of schedule can eliminate a significant financial burden from your life. Although it can be a challenge, getting rid of your home loan is a good way to get ahead financially.

Here are some great strategies for paying off your mortgage that actually work.

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Make extra mortgage payments regularly

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Making extra payments is a great way to boost your bank account by reducing the amount of interest you will pay over the life of your home loan. Regular extra payments can help you barrel through the remaining loan balance ahead of schedule.

Depending on your situation, you might choose to make extra payments on a monthly or weekly basis. For example, you might commit to making an extra payment of $100 or $200 each month.

Refinance into a shorter term

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Refinancing your mortgage can make sense, especially if you are able to lock in a lower interest rate. As you move through the refinancing process, you can opt for a shorter loan term.

Although this might mean your mortgage payment increases, you will get out of debt faster.

Before you refinance, consider the costs of doing so. Depending on how close you are to paying off the loan, refinancing is not always worth the cost.

Make 1 extra mortgage payment a year

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If you can’t commit to an extra monthly payment, consider making one extra mortgage payment each year instead. Each year you make an extra payment will cut some time off your loan term.

For example, let’s say you expect to receive a year-end bonus every year. When you receive the bonus, use some of those funds to make a one-time extra payment.

If you don’t expect a bonus, consider making a monthly extra payment equal to one-twelfth of the mortgage amount. For example, if your monthly mortgage payment is $1,200, consider making an extra payment of $100 per month.

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Make bi-weekly payments

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Many mortgage lenders allow you to make bi-weekly mortgage payments — which is half of your mortgage payment every two weeks.

If you make payments every two weeks, you will end up making an extra monthly payment each year. Those funds can go a long way toward eliminating the mortgage ahead of schedule.

The best part is that many workers receive pay on a bi-weekly schedule, which means your budget might not even feel the impact of essentially making an extra payment each year.

Round up mortgage payments

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Since every little bit goes a long way, rounding up mortgage payments to the nearest $100 can help you make headway on repayment.

For example, if the mortgage payment is $940, round up to making a payment of $1,000 each month. Or if the mortgage payment is $723, round up to paying $800 each month.

Cut other expenses from your budget

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After drilling into the details, you might discover that there is no room in your current budget to accelerate mortgage payments. In that case, you will need to cut out other expenses to make room for extra mortgage payments.

As you cut expenses, look at food and transportation costs to determine where to slash first. For example, you might opt to trade in your car for a more affordable vehicle.

Or you might limit eating out at restaurants until you have made significant headway toward the goal of paying down the mortgage.

Use unexpected income to make a large payment

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Although it’s tempting to splurge when you get a windfall of unexpected income, using those funds to make a large payment can slash your mortgage balance in a big way.

If you use extra income — such as bonuses or tax refunds — for this purpose, you won’t have to cut into everyday spending to lower the mortgage balance.

Downsize

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If you have more space than you need, downsizing offers a way to tap into a lower mortgage balance.

For example, you can use the profits from a home sale to pay off a more affordable house. Downsizing can give your budget some much-needed breathing room.

Use the dollar-a-month plan

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If you have the bandwidth to increase your monthly payment by a single dollar each month, you can eliminate the mortgage years ahead of schedule. The plan works by adding a dollar to every mortgage payment.

For example, let’s say the mortgage payment is $800. In the first month, you pay $800. In the second month, you pay $801. In the third month, you pay $802.

From there, continue to increase the mortgage payment by a single dollar every month.

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Rent out part of your home

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If you have extra space in your home but don’t want to downsize, consider renting out the extra space instead.

For example, if you are able to rent out a spare bedroom for $500 a month, the funds can go a long way toward paying off the mortgage.

If you don’t want to share space with a tenant, consider renting out storage space, like your garage, through a platform such as Store At My House.

Pick up a part-time job or side hustle

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When you boost income, you can use the newfound funds to pay down the mortgage faster. Some ways to earn extra income are through a part-time job or building a flexible side hustle.

Finding a part-time job at a local restaurant or store might be a good fit for some. For others who need a more flexible schedule, a side hustle like pet-sitting or freelance writing could be a better fit.

Bottom line

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Paying off your mortgage early is one of the most dramatic homeowner money moves you can make.

When you finish paying off the mortgage, it will free up significant space in your budget that you can use to tackle other financial goals, such as building an investment portfolio or potentially cutting back on working hours.

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Author Details

Sarah Sharkey

Sarah Sharkey is a personal finance writer who enjoys diving into the details to help readers make more informed decisions. She covers mortgages, insurance, money management, travel, and more.