These strategies can save you tens of thousands in interest and shave years off your mortgage. The key is consistency and choosing a strategy that fits your budget.
Bi-Weekly Payments
Make half payments every 2 weeks instead of full monthly payments
One Extra Payment/Year
Apply one full extra payment annually (bonus, tax refund, etc.)
$100 Extra Monthly
Consistent $100 additional payment each month
Round Up Payments
Round up to nearest $100 (e.g., $1,234 → $1,300)
Paying bi-weekly results in 26 half-payments = 13 full payments annually. One extra payment per year on a $300k, 30-year mortgage at 6% saves approximately $45,000 in interest and pays off the loan 4 years early.
1Lump Sum Payments
Apply windfalls directly to principal
- Tax refunds
- Work bonuses
- Inheritance
- Investment gains
2Pay Raises
Increase payments as income grows
- 50% of raises to mortgage
- Annual increases
- Performance bonuses
3Side Hustle Income
Dedicate extra income to mortgage
- Freelance work
- Part-time jobs
- Passive income streams
4Expense Reduction
Redirect saved money to mortgage
- Cut subscriptions
- Reduce dining out
- Cheaper insurance
Refinancing Scenarios
2% rate drop on $300k loan
1.7% rate drop on $350k loan
2.2% rate drop on $250k loan
When to Refinance
- Rate drop of 1% or more
- Plan to stay in home 5+ years
- Credit score improved significantly
- Want to change loan term (15 vs 30 years)
- Need to cash out equity
When to Prepay
- Current rates are already low
- High refinance closing costs
- May move in under 5 years
- Credit score hasn't improved
- Want to keep current loan terms
If you can reduce your rate by 1%+ and plan to stay 5+ years, refinance usually wins. For smaller rate drops or shorter time horizons, prepaying often provides better returns.
Paying off your mortgage early has tax consequences that should factor into your decision.
Mortgage Interest Deduction
You'll pay less interest, reducing your tax deduction
Property Tax Deduction
Full property tax remains deductible regardless of payoff strategy
Standard Deduction vs Itemizing
High standard deduction may make mortgage interest deduction less valuable
Capital Gains Exclusion
$250k ($500k married) exclusion if living in home 2 of last 5 years
Consider your marginal tax rate when calculating mortgage interest savings. If you're in the 24% tax bracket and pay $10,000 in mortgage interest, your actual cost is $7,600 after the $2,400 tax deduction.
Ignoring Emergency Fund
Consequence: High-interest debt if emergencies occur
Solution: Build 3-6 months expenses before accelerating mortgage
Prepaying Low-Interest Mortgage
Consequence: Missing higher-return investment opportunities
Solution: Consider investment returns vs. mortgage interest rate
Not Communicating with Lender
Consequence: Extra payments may go to future payments, not principal
Solution: Specify extra payments go to principal reduction
Ignoring Employer 401k Match
Consequence: Missing guaranteed 100% return on 401k match
Solution: Max out employer match before extra mortgage payments
Prepaying vs. Refinancing
Consequence: Missing opportunities for lower rates
Solution: Compare refinance costs with interest saved from prepayment
When making extra payments, clearly specify "Apply to principal reduction" or "Principal only payment." Otherwise, lenders may apply extra funds to future payments.
Check your lender's online portal or call to ensure payments are properly applied.
Celebrate these important milestones on your journey to mortgage freedom.
- • Take a screenshot of your updated mortgage statement
- • Calculate your total interest saved to date
- • Review your homeowners insurance (may reduce coverage needs)
- • Research investment options for future mortgage payments
- • Share your progress to inspire others (but stay humble!)
Getting Started
Advanced Strategies
- • The emotional benefit of being mortgage-free is significant
- • Don't sacrifice retirement savings for mortgage acceleration
- • Consider your overall financial goals, not just mortgage payoff
- • Review strategy annually as income and circumstances change
- • Celebrate milestones but maintain consistent progress
- $200k+ interest savings
- $2,000+ monthly cash flow
- Complete home ownership
- Retirement flexibility
- Financial security
- Estate planning advantages
- Consistency is key
- Start small, build momentum
- Track progress monthly
- Automate when possible
- Review annually
- Celebrate milestones