Look, having your mortgage paid off is huge. Huge in terms of quality of life and peace of mind. That’s what this article is about.
Now, before we hop to it, some people will be quick to point out that paying off your mortgage faster might not make sense on paper. If you have extra cash, you could invest instead and likely get a higher rate of return than you pay on the money you borrowed to buy a home.
These people aren’t wrong. But you can of course do both.
When I’m working with clients on their financial plan, paying off their mortgage faster is just one part of how they’re investing for the future. You can save money AND pay off your mortgage quicker.
Doing so is a good way to reduce the interest you pay, or to minimize the overall price of your home. Whichever way you want to look at it, having no mortgage rules. It’s a big step toward financial security and long-term success.
So let’s get to the five ways you can make it happen.
1. Make payments more often.
Usually this means moving from monthly to biweekly payments, so that you sneak in a couple extra payments every year. This is a good option if you get paid every two weeks.
2. Make bigger payments.
Upping your payment by say 10% can be relatively pain-free and have a big long-term effect.
3. Make bigger payments, more often.
AKA combine #1 and #2. A real power move.
4. Make lump sum payments when you come into cash.
This is a strategy that people like the sounds of (because they don’t have to do anything) but that I don’t recommend because it essentially amounts to hope, and hope is not a strategy.
If you get a bonus or a tax refund, sure, put half on your mortgage. But otherwise, I wouldn’t bank on magically having more money at the end of the year.
5. Relentlessly renegotiate your mortgage terms.
This is the one the banks don’t want you to know about. Sure, they’ll send you a piece of paper in the mail saying it’s renewal time. But notice that it says renew, not renegotiate. That’s on purpose.
In my experience, automatically accepting their terms is a good way to pay more interest than you have to. If you go into the bank, you can likely get a better rate. If you’re up for shopping around a little, you can likely get an even better rate.
At the end of the day, the bank actually wants you to have a mortgage. They want you to extend the payment period, they want you to make the minimum payments, they want to keep lending you money so they can keep making interest.
Not cool, right? I know. Unfortunately, it’s how this song and dance goes, so you must learn to tango.
Make a Plan of Attack
Alright, let’s wrap this up.
If you want the peace of mind that comes with having your home paid for in full, make a plan that involves making bigger payments more often and renegotiate your rate every chance you get, so that your money goes as far as possible.
This will reduce the amount of interest you pay the bank, minimize the overall price of your home, and mean that you can live mortgage-free sooner.
If you want help making this plan, let me know. It’s what I do for a living.