How to Pay Off Your Mortgage Faster

This Simple Trick Will Help You Pay Off Your Mortgage Faster

My name is Evan Kaufman, your VA loan originator, here to help explain how to pay off your mortgage faster.

So, why would you even want to pay off your mortgage in the first place?

Some people say, “Evan, I want to get the longest mortgage I can, forever, with the highest amount, so I can take that money and invest it elsewhere.”

I get it—I have a degree in economics and finance, so I understand where that’s coming from.

However, we have a client-focused 20-year vision, where we like to see our folks have a paid-for or near-paid-for home by the time they retire.

Why is that?

Because there’s a different kind of security you have going into that time frame. As much as the numbers might make sense, they don’t always make sense for you personally.

So, let’s say you’ve decided, “Hey Evan, I do want to have my home paid for. Maybe I’ll still have investments and other things, but I want to see what it looks like if I pay off my home early.”

Well, there are a couple of tricks you can use, and we’re going to talk about two of them right now.

1. Make an Extra Payment Every Year Toward Principal

One of the simplest strategies is to make one extra payment every year, specifically towards your principal.

If you do this, you could shave off four to six years of your mortgage—maybe even more, depending on your interest rate.

All that means is that every year, try to save up enough extra cash, or use some unexpected income, to make one extra mortgage payment.

This payment should go directly toward your principal balance, not as a pre-payment for future payments.

Think of it this way: when you take out a mortgage, initially, most of your payment goes towards interest, and only a small portion goes towards the principal.

This is how amortization works (which is a topic for another video).

By paying extra money toward your principal early in the loan, you reduce the balance more quickly, and that has a bigger impact over time.

Especially if you just started your mortgage, making that extra payment once per year and putting it towards principal will have the biggest impact.

When the money goes directly to the principal, it reduces your balance, which means that while your monthly payments will stay the same, you’ll be paying down the principal faster, with less going toward interest over time.

By doing this consistently, you can knock down your mortgage in a bite-sized way without taking up too much extra income.

Effectively, one extra full payment per year dedicated to the principal can shave off around six years, give or take, depending on your interest rate.

2. Biweekly Payments

The second way to pay off your mortgage faster is to make your payments biweekly instead of monthly.

So, rather than making one full mortgage payment per month, you make half a mortgage payment every two weeks.

This is similar to how people who are paid biweekly end up with more paychecks than those who are paid monthly.

By making a half-payment every two weeks, you effectively end up making one extra full payment per year, just like with the first method.

The key here is to make sure your mortgage servicer applies those extra payments to the principal.

You don’t need to sign up for any special programs or pay fees for this; just check with your servicer to ensure that any extra payments are applied toward the principal balance.

Personally, I prefer the method of making one full extra payment per year, spread out over the months.

For example, if your mortgage payment is $1,200 per month, you could pay $1,300 instead, with that extra $100 going directly to principal.

It’s usually pretty easy to set this up with most servicer accounts.

By paying an extra $100 per month, you’ll have made an additional $1,200 toward the principal by the end of the year, which will significantly reduce your mortgage balance.

You can even increase that to $150 a month, and you might shave nearly a decade off your loan—pretty wild, right?

Final Thoughts

There are definitely ways to consolidate debt on a mortgage if you want to, especially when interest rates are higher.

If interest rates are at 6%, 7%, 8%, or whatever it may be, compared to other investments, it could be worthwhile to pay it down. There’s no shame in doing so.

These are just a couple of tips to help you pay off your mortgage faster.

My name is Evan Kaufman, your VA loan originator. I hope this helps. Bye!