Tips to Pay Down Your Mortgage – FAST!
If you’re like most homeowners, you love your house and everything it represents. What you probably don’t love is writing that mortgage check every month. It’s easy to daydream about what you could do with that money instead—early retirement, starting a business, big family vacations, or simply enjoying a more flexible budget. The good news? With a few smart strategies, you can keep the home you love and work toward ditching the mortgage much sooner than you think.
Believe it or not, there are several proven ways to shorten the term of your mortgage dramatically—sometimes by years—and save tens of thousands of dollars in interest. Here are some ideas to discuss with your lender or financial professional.
Apply Your Tax Refund to Your Principal
If you typically receive a tax refund each year, you’re in a great position to pay down your mortgage faster. Let’s say you get back about $2,700 each year. Instead of treating it like “bonus” money, apply that refund directly to your loan principal.
Using a simple example, if you have a $200,000 mortgage with a 30-year term at 5% interest and you put $2,700 toward your principal each year for 5 years, you could trim roughly 4 years off your mortgage and save about $35,000 in interest. Stick with the plan for 10 years and you may eliminate around 7 years of payments and save more than $54,000 in interest over the life of the loan.
Make One Extra Payment Each Year
Another powerful strategy is to make the equivalent of one extra mortgage payment each year. The easiest way to do this is to divide your monthly payment by 12 and add that amount to every payment.
For example, if your monthly payment is $1,074, divide it by 12 to get about $89. When you pay $1,163 each month instead of $1,074, you’ll have made a “13th payment” by the end of the year without a huge hit to your budget. Over time, this can shave almost 5 years off a typical 30-year mortgage and save you more than $33,000 in interest.
Important note: simply sending half your payment twice a month usually doesn’t help, because most lenders apply it only when the full amount is received. Adding that extra 1/12 each month is what makes the difference.
Use Cash-Back Rewards to Boost Your Payments
If you regularly use a rewards credit card and pay the balance in full each month, those cash-back dollars can become an extra principal payment every year. Many cards let you redeem rewards as a direct deposit into your bank account.
Groceries, gas, streaming services, cell phone bills, and other everyday expenses can all earn rewards, depending on the card you choose. At the end of the year, cash in the rewards you’ve accumulated and send that amount as an extra mortgage payment.
You can compare different cash-back cards and their structures using resources such as this quick guide: cash-back credit card overview. Be sure to read all terms carefully and only use rewards cards in a way that fits your budget and spending habits.
Frontload Extra Payments in the Early Years
During the first years of your mortgage, most of your payment goes toward interest rather than principal. That’s why extra payments made early in the loan have such a big impact—more of that extra money is going straight to the principal balance.
Using our example of a $200,000 mortgage at 5% for 30 years, paying an extra $200 each month for just the first 5 years could save you nearly $31,000 in interest and shorten your loan term by about 2 years. Even a smaller additional amount, if you’re consistent, can make a meaningful difference over time.
“Fake” a Refinance Without the Closing Costs
Refinancing can sometimes lower your interest rate and shorten your term, but it usually comes with closing costs. If refinancing doesn’t make sense for you, you can “fake” it by calculating what your payment would be on a shorter term and then paying that amount voluntarily.
Try a simple tool such as this mortgage calculator to compare options. For example, if you refinanced a $200,000 mortgage to a 15-year term at 3.25%, your new payment might be around $1,400 instead of $1,074.
If, at year 5, you commit to paying $1,400 each month on your existing loan (without actually refinancing), you could knock roughly 10 years off your mortgage and save close to $55,000 in interest—without paying refinance fees. The key is sticking with that higher “fake refinance” payment consistently.
Round Up Every Payment
Rounding up is a simple, low-stress way to make progress. Take your regular payment and round it to a slightly higher, easy-to-remember number. For instance, rounding a $1,074 payment up to $1,100 adds just $26 per month—but over time it can trim about 2 years off your mortgage and save more than $10,000 in interest.
This is a great option if your budget is tight but you still want to take small steps toward early payoff. Think of it as skipping one lunch out or one impulse purchase each month in exchange for years of freedom later.
Combine Strategies for Even Faster Results
Want to accelerate things even more? You don’t have to choose just one strategy. You might decide to:
- Apply your annual tax refund toward your principal,
- Round up your monthly payment, and
- Use cash-back rewards as an extra payment at the end of the year.
Layering these approaches can dramatically cut the life of your loan and the amount of interest you pay—potentially saving you tens of thousands of dollars over time.
A Quick Reminder
Every homeowner’s situation is different, and the examples here are for illustration only. Before you change your payment schedule or send extra principal, confirm with your lender how they apply additional payments and ask about any prepayment penalties. It’s also a good idea to talk with a trusted financial or tax professional to be sure these strategies fit your overall goals.
Ready to turn your dream of a mortgage-free future into a plan? When you’re prepared to make your next move, the Ernest Homes team is here to help you find the right home—and the right path—for your family.
