Paying Off Your Mortgage Early
May 21, 2025
Others want to pay more and pay off their mortgage as early as possible. Several strategies can speed up the process for those who find the benefits of early payoff more attractive.
Making Extra Payments: This is the most direct method.
Bi-weekly Payments: Instead of one monthly payment, make half a payment every two weeks. This equals 26 half-payments, or 13 full monthly payments, per year. The extra payment is applied to the principal balance. This can shorten the loan term but double check with your lender that extra payments are correctly applied to the principal.
Adding a Set Amount Monthly: Adding even a modest sum to each monthly payment, clearly designated for "principal reduction," can make a difference over time. For example, rounding up your payment or adding an extra $100 or $200 can be effective.
One Extra Payment Annually: Making one additional mortgage payment each year, perhaps from a tax refund or bonus, has a similar effect to bi-weekly payments.
Lump-Sum Payments: Applying larger, occasional amounts, such as an inheritance or a significant bonus, directly to the principal can greatly reduce the loan balance and speed up the payoff.
Refinancing to a Shorter-Term Loan: If your finances allow for higher monthly payments, refinancing from a 30-year mortgage to a 15-year or 10-year loan is an effective strategy.
Shorter-term loans typically have lower interest rates than 30-year loans, meaning more of each payment reduces principal from the start.
Monthly payments will be higher than those on a 30-year note, but the total interest paid will be much lower, and you will own the home free and clear much sooner.
Mortgage Recasting (or Re-amortization): This is a less common option for those who can make a large lump-sum payment. After the payment reduces the principal, the lender adjusts the monthly payments based on the new balance and the original remaining loan term.
This leads to lower monthly payments, improving cash flow, while keeping the original payoff date (though you can continue to pay the previous, higher amount to pay it off sooner). Some lenders offer to keep the payment the same and shorten the term. Not all lenders offer
recasting, and there might be a small fee.
The Prepayment Penalty: A Critical Consideration: Does your loan include a prepayment penalty? FHA mortgages do NOT feature these costs. The penalty is a fee some conventional lenders charge if you pay off all or a significant portion of your mortgage ahead of schedule.
It is worth noting that FHA mortgages do not permit the lender to add a prepayment penalty, so if you have an FHA loan or refinance into one, you won’t be charged extra for the privilege of paying off the loan ahead of schedule.
FHA Loan Articles
June 30, 2026FHA loans offer low down payment options and more forgiving credit requirements for borrowers who may not qualify for a conventional mortgage or need to save more money out of pocket at the front end of the mortgage. But even with more forgiving credit requirements, some borrowers are tempted to omit certain debt information from their home loan applications. What does it mean to conceal a debt or financial situation from your loan officer?
June 30, 2026Some borrowers start working on their credit scores but get impatient with the process because they can't predict when their efforts will change their FICO scores. How long does it take for your FICO scores to update when you pay off a loan, reduce your credit card balances, or take other steps to make yourself a better credit risk? The short answer is that credit reporting procedures are not standardized, and it may take more time than you realize to get those positive credit actions added to your credit report.
June 29, 2026Mortgage interest rates are "moving targets" shaped by national economic trends and the borrower's specific financial profile. What is your FHA loan interest rate? Much depends on the financial data you bring to the table. Lenders set interest rates daily based on a snapshot of market conditions, but the rate ultimately offered also reflects risk, equity, and the lending institution's internal operational costs.
June 28, 2026An FHA appraisal differs from a conventional appraisal. While the goal of a conventional appraisal centers on market value, the FHA appraisal also focuses on the buyer's safety and soundness. FHA lenders select the appraiser, not the home buyer.
June 24, 2026FHA loan closing costs vary by property price and geographic location, rather than by a single nationwide flat fee. Total settlement charges combine percentage-based fees, local government taxes, and marketplace service costs. If you are new to buying a home, you'll want to get familiar with the closing cost issues discussed here to avoid budgetary surprises later on.
