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How to Pay Off a Mortgage Early

Your home is one of your most valuable assets and keeping it safe should be on top of your priority list. When you take out a mortgage to finance your home purchase, you put your home at a calculated risk. The property is the collateral in the deal and you stand to lose it if you cannot repay the loan. Prepaying your mortgage is a good way to ensure that this risk does not affect your home for any longer than is absolutely unavoidable. Here are some tips on how to pay off a mortgage early.

Take Advantage of Low Interest Climate

The present low interest climate is ideal for paying off your loan early. If you have an adjustable rate mortgage, you will have gained from the downward adjustment of your mortgage rate. Your monthly repayment will now be much lower than what you were paying when the rates were high. Use this extra amount to pay back some of the principal on your loan.


For those with a fixed rate mortgage, refinancing can be beneficial in the current times when rates are low. You can opt for a fresh fixed rate mortgage to lock in the current low interest for the rest of your loan. Keep your monthly repayments at the same level as before to pay more principal and less interest each time, and pay off the debt faster. Both adjustable rate and fixed rate mortgages can be refinanced into shorter term loans so that you fulfill your obligations quickly.

Make a Budget

There are many areas where you can save money every month. Using discount coupons at your favorite store, collecting reward points from frequently visited shops to redeem against purchases, cutting down credit card spending – these are just some of the many things you can do to save money. Make a budget, listing your monthly income and expenses and get rid of the unnecessary expenditure. If you end up with surplus funds at the end of the month, put it in a separate account to create a fund that can be used to pay off your mortgage.

Apply Payments to Principal, Not Interest

When you make extra payments to the lender, make sure you specify that they should be set off against your principal and not added to interest payments. Reducing your principal is the only way to pay off your mortgage early. You also need to check with the lender for any prepayment penalty that you may be charged.

Be Disciplined

Borrowers often lose heart when they begin paying off the principal but see no discernable reduction in monthly costs. Remember that your home is your most expensive asset and your mortgage loan is a large sum. Small extra payments may not show great results immediately but in a few months, you will start seeing a significant reduction in your debt. A simple and effective solution to ‘how to pay off a mortgage early’ is by making small but consistent payments. Discipline and commitment are the keys to success to any debt reduction strategy.