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Paying a Mortgage Off Early Pays Big

“Should I pay my mortgage off early?” Some simple math answers the question.

Put $50,000 down on a $250,000 house. Finance the balance with a typical 30-year mortgage at a 6% interest rate. The monthly principal + interest payment ends up around $1,400.00, plus taxes and insurance. Over the course of 30 years, those payments add up to more than $500,000 – at least twice what you “paid!” –  not to mention what you’ll spend on home repairs, maintenance, and improvements. (Test out your numbers here on our Mortgage Calculator!)

So, yes, it pays to pay off your mortgage early. But how to do it?

It’s easier than you might think, even for first-time buyers, who are usually left overwhelmed and exhausted after their inaugural home buying experience. Here are a few suggested methods, which involve a change of mindset, some new habits, and a little discipline.

Make Extra Payments

Making extra payments sounds simple but can feel like a weighty ask after shelling out tens of thousands of dollars for a down payment, along with the monthly mortgage payments and other expenditures, both expected and unexpected. However, even small extra payments can significantly reduce the total interest paid over the lifetime of the loan.

Make one extra mortgage payment annually

There are two relatively painless ways of doing this.

One, instead of monthly payments, pay half your mortgage every two weeks. Over the course of the year, this results in one extra payment, and incrementally faster loan payoff. Consider that this method, making just one additional payment annually, means 30 fewer mortgage payments over the lifetime of the loan. Within the finances described above, that’s a payoff that comes 2 ½ years earlier, and a savings of approximately $42,000.

The other option is to increase your monthly mortgage payment by 1/12th. So instead of $1,400.00, pay an extra $116.67 each month, making the total payment $1,516.67. The end result is the same as that described above.

Roundup payments

Round the mortgage payment up to the nearest $100, or even the nearest $50. It adds up! Instead of $1,400.00, pay $1,450.00 – only $50 more. Paying $1,500.00 would add an additional $100 towards the payment. Think of it as sacrificing dinner out a few times a month, and the value of these small, incremental additional payments is put into perspective.

Use windfalls

Most people experience pleasant and unexpected financial surprises at times – gifts, bonuses, cash back on credit card purchases, tax refunds, or maybe a surprise raise! It’s tempting to use the extra income to splurge, but methodically applying those extra funds to mortgage payments quickly becomes habit, not sacrifice, and saves money in the end.


Some lenders offer mortgage recasting, in which a borrower makes a lump sum payment and payments are recalculated based on the reduced principal. This doesn’t reduce the interest rate, but it can lower monthly payments. However, if you continue paying the “old” payment, which presumably did not present a substantial financial hardship, that mortgage will get paid off even sooner!

First and foremost, confirm with your lender that any extra payments go to principal, not interest. Keep in mind that there are many benefits to paying down your mortgage more quickly. Being mortgage-free sooner frees up cash for retirement planning, gives peace of mind that comes from fully owning a home sooner, reduces overall housing costs, increases financial stability, and gives you a real sense of pride in full ownership.

Have more questions about how to payoff your mortgage faster? Kansas City Credit Union can help – contact us today for more information!

Contact Kansas City Credit Union Today!
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