How to pay off your mortgage early?
The most effective way to pay off your mortgage early is to make extra payments directly toward your principal, meaning the amount you originally borrowed.
Even small, consistent additions reduce the interest you owe and shorten your loan term faster than you might expect.
This guide covers seven strategies ranked by impact, so you can start with the moves that make the biggest difference and work down to what fits your situation and budget.
Before using any of these strategies, confirm two things with your lender:
No prepayment penalties: Make sure your loan won't charge a fee for paying off early.
Principal application: Ask that any extra payments go directly to your principal, not to future scheduled payments or interest.
Table of Contents
- Strategy 1: Make extra payments toward the principal
- Strategy 2: Switch to biweekly payments
- Strategy 3: Refinance to a shorter term
- Strategy 4: Apply windfalls to your principal
- Strategy 5: Recast your mortgage
- Strategy 6: Put raises and side income to work
- Strategy 7: Refinance to a lower interest rate
- Pros and cons of paying off your mortgage early
- When paying off early might not be the right move
- The bottom line
This is the highest impact move available to most homeowners, and you can start small.
Paying an extra $100 each month on a $350,000 loan at 6% could cut your repayment term by nearly five years and save more than $70,000 in interest over the life of the loan.
A few ways to approach it:
Add a flat amount each month: Even $50 to $200 makes a real dent over time.
Make one extra full payment per year: Divide your monthly payment by 12 and add that smaller amount to each month's payment.
Apply windfalls: Tax refunds, bonuses, or one-time income can go directly to your principal when they come in.
Remember the compounding effect: Every dollar you put toward your balance reduces future interest and builds your home equity faster.
Instead of one monthly payment, split it in half and pay every two weeks.
Because there are 26 two-week periods in a year, you'll end up making the equivalent of 13 full monthly payments. One extra payment annually, without it feeling like a lump sum.
Many lenders let you set this up directly. If yours doesn't, you can replicate the effect by scheduling one additional principal payment each year.
If you can manage higher monthly payments, refinancing from a 30-year to a 15-year mortgage can significantly reduce the total interest you pay. You'll likely qualify for a lower interest rate in the process.
Keep in mind that refinancing comes with closing costs, typically 2–5% of the loan amount. It makes the most sense if you plan to stay in your home long enough to recoup those costs through interest savings.
Terms vary by lender, so compare options carefully and consider speaking with a financial advisor before deciding.
Unexpected income is one of the most underused tools for early mortgage payoffs.
Rather than adjusting your spending upward when you receive a bonus, or refund, consider directing part of it toward your loan instead.
Good opportunities to watch for:
Annual bonuses or profit-sharing payouts
Tax refunds or rebates
Proceeds from selling personal property or investments
You don't need to apply the full amount; a portion directed toward your principal each year adds meaningfully over time.
Axos Home Equity
Tap into your home equity.
Turn your home equity into cash with a lump sum at a fixed rate. Use it for debt consolidation, home upgrades, and more.
If you come into a large sum of money, such as an inheritance, a business payout, or proceeds from a sale, a mortgage recast is worth considering.
With a recast, you make a lump-sum payment toward your principal, and your lender recalculates your remaining payments based on the new, lower balance.
You keep the same interest rate and loan term, but your monthly payment goes down. This can free up cash flow while still helping you pay off your home sooner.
Not all lenders offer recasting, and there's usually a small processing fee. Check with your lender to confirm that it's available on your loan.
Rather than letting lifestyle inflation absorb income increases, redirect a portion toward your mortgage.
Even committing half of a raise to extra principal payments each year can meaningfully compress your timeline.
The same logic applies to side income, freelance work, or any recurring income stream that sits outside your regular budget.
If rates have dropped since you took out your loan, refinancing a lower rate reduces how much each payment goes toward interest. Pair with extra principal payments and the effect of compounds.
As with any refinance, weigh the closing costs against the projected savings, and factor in how long you plan to stay at home.
A financial advisor or mortgage specialist can help you run the numbers.
Pros | Cons |
|---|---|
Saves thousands in interest over time | Ties up cash in a non-liquid asset |
Builds equity faster | May reduce mortgage interest tax deductions |
Provides long-term financial security | Could limit funds for investing or emergencies |
Eliminates a major monthly obligation | Some loans may include prepayment penalties |
Becoming mortgage-free is a worthwhile goal, but there are situations where putting extra money toward your loan isn't the best financial decision.
It may make more sense to focus elsewhere if you're carrying high-interest debt like credit card balances. Paying those off first will usually save you more overall.
The same applies if you haven't yet built an emergency fund of three to six months of living expenses, or if you're not yet contributing enough to your retirement accounts to capture an employer's match.
If your mortgage rate is low compared to current market rates, your extra funds may also work harder in a tax-advantaged investment account like a 401(k) (an employer-sponsored retirement savings plan) or an IRA (individual retirement account) than they would paying down your loan.
If you expect to move within a few years, keeping more cash available for your next down payment may be the smarter call. A financial advisor can help you think through the trade-offs for your specific situation.
Paying off your mortgage early is achievable for most homeowners; it just takes a clear strategy and some consistency.
Start with the highest impact moves first, build the habit, and apply windfalls when they come. Even modest effort compounds significantly over a 15- or 30-year term.
If you've been building equity and want to put it to work, an Axos home equity loan lets you access that value at a fixed rate for home improvements, debt consolidation, or whatever your next financial goal looks like. Learn more about Axos home equity loans.