Few people keep a 30 year loan for the full term. In fact, homeowners only stay on site for an average of 13 years, and their loans can have an even shorter useful life, if they eventually refinance. Those 30 years of interest payments can feel like a burden, especially when compared to today's lower interest payments. You are wondering how to get your mortgage off faster so you can live debt free and fully own your home.

Paying back your mortgage early means you are making additional payments on your main loan balance. Paying off the extra capital on your mortgage can save you thousands of dollars in interest and help you build equity faster. Here are few ways to do so:

  • An extra mortgage payment every year
  • Add extra dollars to every payment
  • Apply a lump sum
  • Mortgage Recast (different from refinancing)
  • A combination of the above

How much can I save by paying extra capital on a mortgage? 

The benefit of additional repayment on a mortgage is not only to gradually reduce the monthly interest cost, but also by paying off the outstanding balance of your loan through additional payments of the mortgage principal, which drastically reduces the total interest you owe during the period Term of the loan.

Here's an example of how prepayment saves time and money: John takes out a $ 120,000 mortgage at 4.5 percent interest. The principal and monthly interest on the mortgage is $ 608.02. This happens when John makes additional mortgage payments (Source here):