Pay Off Mortgage Early
Pay Off Mortgage Early

By Alena Kairys

Nov 29, 2020

Your mortgage is one of the most significant financial obligations you will have in your life. Being able to pay off your mortgage early can save you a lot of money in the future, but there may be some instances where it may not benefit you. Here are some important factors to consider if you want to pay off your mortgage early.

Benefits of Paying Early

Save Money

The most compelling reason to pay off your mortgage early is to save on interest payments. When you first acquire a mortgage, most of your payment goes towards the interest, not the principal. However, if you apply additional payments to the principal, it can reduce the amount of interest you accrue and lessen the amount of time needed to pay back the loan. Even by making an extra payment once a quarter can make an impact over the life of the loan.

For example, if you have a 30-year fixed-rate mortgage of $100,000 with 3% interest, you will pay about $51,000 of interest. If you were to pay an additional $100 each month towards the principle, you would save around $15,000 in interest and pay off your mortgage 8 years sooner. 

It can be helpful to use a mortgage calculator to get a sense of how long it will take for the loan to mature regularly during your comparisons.

Peace of Mind

You can’t put a price on how good it will feel to pay off your mortgage! It’s psychologically liberating to not have outstanding debt, and it also frees up your finances to be used elsewhere. Part of the joy of homeownership includes being able to officially own your home, so why not try to get to that point sooner than later?

Factors to Consider

Prepayment Penalty

Even though paying off your mortgage early can save you money, it causes lenders to lose money. Some lenders may impose a prepayment penalty if you pay extra on your monthly statement or finish paying the mortgage before the term is up. This fee is usually a small percentage of your mortgage or equal to the interest for a certain number of months. Depending on how much the penalty is, the reward of finishing early may not be worth it. Though this charge isn’t as common as it once was, make sure you understand your lender’s prepayment policy if you decide to expedite your mortgage payments.


Before you write another check to your loan servicer, you need to ask yourself whether you will still have enough money to pay for an unexpected expense. It’s recommended that you have at least three to six months’ worth of savings for emergencies. Additionally, be sure to account for other saving goals, such as education or retirement funds. Remember that making another payment is optional, so don’t feel like you need to overextend your budget.

Other Debt

Your mortgage is probably the most expensive debt you have, but it’s likely not the only one, either. When you have car, credit card, or student loan payments to consider, you may not want to concentrate all your efforts on getting rid of your mortgage. If you have other debts that have a higher interest rate, it might be wiser to pay off those first.

Ultimately, you should speak with a financial advisor before making any major financial decisions. Depending on your individual situation, paying off your mortgage early can be a smart way to get ahead. Whether you decide to take a shortcut with your mortgage or stick to the original payment schedule, the happiness of finally paying off your home will be worth it.

If you want to know more about how to pay off your mortgage faster, contact one of our licensed Mortgage Loan Originators. If you are ready to begin the home buying process, click here to get started!

These blogs are for informational purposes only. Make sure you understand the features associated with the loan program you choose, and that it meets your unique financial needs. Subject to Debt-to-Income and Underwriting requirements. This is not a credit decision or a commitment to lend. Eligibility is subject to completion of an application and verification of home ownership, occupancy, title, income, employment, credit, home value, collateral, and underwriting requirements. Not all programs are available in all areas. Offers may vary and are subject to change at any time without notice. Should you have any questions about the information provided, please contact us.