early Mortgage Payoff

Paying off your mortgage early

Traditionally mortgage terms are for 15 or 30 years. In recent times, there is an option to make the term what you want it to be, for example, 21 years. For this article, I will assume you have a 30-year mortgage. When making extra payments it’s best to discuss with your current mortgage servicing company for guidance. My suggestion would be to make the extra payment on a different day of the month other than the day you make your monthly routine payment. Paying off your mortgage early also saves mortgage interest. Let’s look at a couple of options for paying off your mortgage early. 

Pay one extra payment annually

Make one extra payment per year. Extra payment means principal and interest only. This reduces the term of the mortgage by approximately 5 years and 3 months. The actual time will be determined by the time of the year you made the extra payment. 

Pay Extra amount monthly

Divide the principal and interest by 12. Then make that payment monthly. For example, if the monthly principal and interest is $2,400.00, divide $2,400.00 by 12 and make $200 additional payment monthly.  This reduces the time by approximately 5 years and 5 months

Pay biweekly

Make bi-weekly payments or pay every two weeks. This means you would make 26 payments per year, which is equivalent to 13 months. Do not try this option without first contacting your mortgage company to ascertain this is allowed. This option reduces the term of the loan by approximately 5 years and 4 months. 

Custom payment 

Ask a mortgage professional how much extra payment per month would it take be paid off in a specified period. 

Prepayment penalty

Some loans may have a prepayment penalty if you pay part or the entire balance early. Check your closing documents to determine if your loan has a prepayment penalty before attempting to pay off your mortgage early. 

Leighton Grant 

Mortgage Loan Originator 

NMLS 2040998