How to Pay off a 30-Year Mortgage Early

There’s a fine line between “It would be nice to be debt-free” to “I need to be debt-free now.” That line is usually some kind of external motivation, like the need to take out a loan or pay off a mortgage early.   

If you’ve crossed that line, you know how urgent it feels. And you know the frustration of searching for ways to pay off that mortgage early, only to find small-scale saving tips like cutting down on your coffee habit or canceling your newspaper subscription.

Those kinds of budgeting tips won’t help if you need to get rid of your mortgage debt ASAP. What can you actually do to pay off your mortgage?

5 Ways to Pay off a 30-Year Mortgage Early

Because everyone’s finances are different, there’s no one best way to pay down a mortgage. Finance experts tend to advise homeowners not to arrange an early repayment if it incurs a fee, but even that can’t be avoided when it’s in your contract.

If you know you need to repay early, take a look at these options. Chances are, at least one will be a possibility for you.

1. Reconfigure Your Payments With Your Bank

If you have the resources to do it, the best way to pay off a mortgage early may be to work backward from your target debt-free date.

Use an online mortgage goal calculator to figure out how much your monthly payment would have to be in order to repay your mortgage by that day. You’ll need to know how much you still owe, your interest rate, and your current payment amounts.

Then ask your lender if you can apply your extra payments to the principal only, not to the interest. If the answer is yes, double-check your budget and get started!

2. Make One or Two Extra Payments per Year

If you’re comfortable with large lump-sum payments—maybe you come into large bonuses occasionally—it’s probably easier for you to consider this strategy. But remember, you can save up for these payments in small doses and just make them all at once.

Determine how much you can afford to pay as your extra yearly payment to pay off your mortgage early. If the payoff date isn’t soon enough the first time around, do some math and find out if you can manage a higher yearly payment or an extra lump-sum payment. 

3. Switch to Biweekly Payments

You might be more comfortable paying small amounts more often instead of paying a large amount once or twice a year. Biweekly payments let you do exactly that.

Since there are 52 weeks in a year, biweekly payment plans mean that you’ll make 26 payments per year on a biweekly plan. Each payment will be half of what your monthly payment would have been. That works out to two extra half-payments, the equivalent of one full monthly payment, every year.

Why is it extra? Assume you created semi-monthly payments by dividing each of the 12 monthly payments in half and making two payments per month. That’s 24 payments. Biweekly gets you paying that half amount 26 times instead of 24 because it starts with the number of weeks per year not the number of months.

Maybe that one extra month’s worth of payments per year isn’t enough. If so, think about also reconfiguring your payments so that you’d pay off your mortgage by your target date.

4. Move to a More Affordable Home 

Many people downsize because they can pay off the mortgage on a larger house and then buy a smaller one that’s less expensive. If you decide to go this route, make sure that your new house not only costs less overall but allows you to:

1. Get a 15-year fixed-rate loan
2. Make a 10 percent to 20 percent down payment
3. Pay closing and ownership costs without taking on more debt
4. Work out a monthly payment that is no more than 25 percent of your monthly net pay

If you can’t afford to take out another mortgage, you could consider moving to an apartment or rental house. You’d save the costs of buying and owning a home, from closing costs to property taxes, but you’d still have the expenses of moving. In 2019, those costs tend to average just over $1,000, perhaps higher or lower depending on where you’re going and how big your house is.

And those are just the monetary costs. Moving is an extremely emotional and stressful experience, especially for children. Studies have associated frequent relocations in childhood with decreased school performances, more behavioral problems, and even poorer relationships in adulthood.  

Pulling up stakes can help your wallet, but your family might end up paying the price. And it’s no picnic for your own mental health either.

5. Sale-Leasebacks

By this point, you may be feeling like none of these strategies will work for you to pay off your mortgage early. Maybe you can’t afford to make any extra payments and it’s not a good time for you to move.

There is still a solution out there for you. It’s called a sale-leaseback, and as its name indicates, it allows you to sell and collect your equity without relocating.

Here’s how it works.

You sell your home and remain as a renter. No boxes, no house-hunting, no finding new grocery stores or enrolling the kids in new schools. You even get your equity in your bank account in less than three weeks.

You keep paying rent until you decide to repurchase your home or relocate.

It’s not a loan, so you don’t take on more debt. For many people, it’s the easiest way to pay off a mortgage early.

Key Takeaways

When you ask yourself how to pay off a 30-year mortgage early, the answer almost always involves bigger or more frequent payments. The only way to get around that is to come into money or sell your home. For most of us, scheduling a windfall isn’t realistic. Talk to a financial advisor today and see what is a realistic goal for you to achieve.