If you’re trying to figure out how to pay off a 30-year mortgage in 15 years, there are several options, including making extra payments toward the principal, making biweekly payments, and more. And paying off a home loan early can save a substantial amount of interest.
But before you become a mortgage-paying overachiever, there are a few things you need to know about how to pay a 30-year mortgage in 15 years and what to consider before you do. Let’s take a look.
Key Points
• Paying off a 30-year mortgage in 15 years can save a substantial amount of interest and give homeowners a sense of accomplishment.
• Making extra principal payments is the primary way to pay off a 30-year mortgage early and reduce the total interest paid.
• Switching to biweekly payments results in making one additional payment per year, which can reduce your mortgage term by a few years.
• Refinancing to a lower interest rate and/or a shorter term can help homeowners pay off their mortgage faster.
• Rounding up monthly mortgage payments can significantly reduce the mortgage term.
Should You Pay Off Your Mortgage Faster?
When you start paying on a 30-year mortgage, most of your payment goes toward interest rather than the principal (the amount you borrowed). This makes paying down your mortgage and building equity a slow process.
Over time, the percentage of your payment that goes toward interest vs. principal will change. Toward the end of your 30-year loan, you will pay more toward the principal than interest. This is what’s known as mortgage amortization.
Instead of following the amortization schedule, paying more on your mortgage loan — in one way or another — will reduce the principal more quickly, which means you’ll pay less interest overall.
Paying off your mortgage faster may give you a sense of accomplishment and save you a lot of money in interest charges, but if it takes you further away from your financial goals, it may not be worth it to you. Consider what you value most before deciding to put extra money toward paying off your mortgage.
Recommended: Is it Smart to Pay Off a Mortgage Early?
Pros and Cons of Paying Off Your Mortgage Early
Paying off a 30-year mortgage in 15 years has benefits, but in some cases, it may not make sense. Consider these pros and cons.
| Pros | Cons |
|---|---|
| Get rid of your mortgage faster | Have a higher monthly payment |
| Own your home outright sooner | Lose the home mortgage interest tax deduction (if you itemize) |
| Build equity faster | Have less money available for retirement, higher-interest debt, a rainy day fund, etc. |
| Save money on interest | Lose potential gains from investing that might total more than interest saved |
Factors to Consider Before Paying Off Your 30-Year Mortgage Faster
While paying off your mortgage early — a few zealous borrowers aim to pay off a mortgage in five years — can save you tens of thousands of dollars in interest, the lost opportunities from not having money readily available for other things could be more valuable. Think about:
• Have I been contributing enough to my retirement plans as an employee or funding retirement as a self-employed person?
• Do I have three to six months of expenses, or more, if my personal situation calls for it, in an emergency fund?
• Am I able to secure a lower rate or shorter term for a refinance to pay off my mortgage faster? Would a cash-out refinance make sense?
• Do I have higher-interest debt like credit card debt or student loans I should tackle first?
• Have I set up a college fund (if kids are in the picture)?
• Does my mortgage carry a prepayment penalty? (This is unlikely for loans originated after January 2014.)
• Am I able to secure a lower rate or shorter term for a refinance to pay off my mortgage faster? Would a cash-out refinance make sense?
Impact on Savings and Investments
As the questions above suggest, if you’re thinking of paying your mortgage off early, it’s worth evaluating whether the money you’d spend doing that might be put to better use elsewhere. It’s important to have emergency savings, for instance, so that you have a financial cushion if you need one, and retirement savings are also crucial. You may also feel that it would make more sense to invest the money, though returns may not be what you expect. It can help to talk to a financial adviser about what you’d like to prioritize.
Prepayment Penalties
As mentioned above, prepayment penalties are also a significant factor to consider. Prepayment penalties are fees that some mortgages charge if you pay some or all of your mortgage off early. These penalties can vary significantly. They may only kick in if you pay your mortgage off within the first few years or if you pay off a very large chunk all at once – but since they can differ, it’s worth checking with your lender to find out if you have a prepayment penalty and what exactly that means for you.
Fortunately, these penalties have become rarer since 2014, due to the Dodd-Frank Act. Since then, only conventional loans can have these penalties and they’re most commonly attached to non-conforming loans, like jumbo loans, or non-qualified mortgages (issued to borrowers who don’t meet traditional criteria). If you got your mortgage before 2014, however, these rules don’t apply, so it’s even more important to check with your lender.
How to Pay Off a 30-Year Mortgage Faster
There are at least five methods for how to pay off a 30-year mortgage faster – in 15 years if that’s your goal.Just be sure that you specify to your lender that you want the extra money to go toward principal. (There will usually be a way to indicate this, no matter what payment method you use.)
Make Extra Principal Payments
Paying more toward principal is the primary way to pay off a 30-year mortgage early.
Here’s an example of how interest adds up: Assuming you buy a $450,000 house and put 10% down on a 30-year mortgage at 6.50%, this mortgage calculator shows that total interest will be $516,551. Even by the 120th payment, you will have paid only $61,657 of the $405,000 principal and will have paid $245,528 in interest.
Putting just $200 more per month toward principal, you’d save $112,234 in interest and pay off the mortgage five years and six months earlier.
To pay off this same mortgage in 15 years, however, you would need to put an extra $975 per month from the outset of the mortgage. That’s a substantial additional expense for many homeowners. You would, however, save more than $287,000 in interest over the life of the loan.
Switch to Biweekly Payments
Biweekly payments are half-payments made every two weeks instead of a full payment once a month. Making biweekly payments instead of monthly payments results in one additional payment each year.
Using the example above, making one full, extra mortgage payment each year will reduce the amount of time it takes to pay off your 30-year mortgage, but only by five years and nine months.
Look Into Refinancing
Refinancing your loan into one with a lower interest rate and/or a shorter term (such as a 15-year mortgage) can help you pay off your mortgage faster. A shorter term usually comes with a lower interest rate, so you’re saving on interest while also paying your mortgage off in less than 30 years.
Refinancing to a lower interest rate will reduce your monthly mortgage payment, so if you continue to make the higher payment, you’ll pay your mortgage off faster.
Round Up Your Payments
Another common way to prepay your mortgage is to round up your monthly mortgage payment, which is likely not an even number. If your monthly payment is $2,559, for instance, you might be able to round it up to $3,000 a month. That means you’re paying an extra $441 every month toward your mortgage, and it would let you pay off your mortgage more than nine years early.
Budget Strategically to Maximize Savings
If you’re trying to figure out how to pay off your mortgage faster, these strategies may seem expensive or unaffordable. But something that can help with all of them – and serve as an independent tactic in itself – is to focus consciously on saving money and eliminating non-essential spending. This can involve creating and/or reviewing a budget to understand exactly where you can save money by taking steps like eating out less, canceling subscriptions you don’t need, buying on-sale and bulk groceries, and avoiding “retail therapy.” Your budget can help you track how much you’re saving – and that money can go toward extra principal payments on your mortgage. Keep in mind, too, that windfalls, like gifts or work bonuses, can also feed into paying more toward your mortgage.
Recommended: Mortgage Questions for Your Lender
The Takeaway
There are multiple approaches when it comes to how to pay off a 30-year mortgage in 15 years. Paying off your mortgage early will result in substantial interest savings, but the tradeoff for many borrowers is not having extra money to put toward retirement and other purposes.
Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.
FAQ
Is it cheaper to pay off a 30-year mortgage in 15 years?
The amount of interest you’ll save by paying off your mortgage in 15 years instead of 30 is substantial, but your monthly payments will be higher.
Why shouldn’t you pay off your mortgage early?
Homeowners who haven’t fully funded their retirement accounts, who don’t have an emergency fund, or who have other debt with high interest rates may not want to pay off a mortgage early. Also, those who think they can earn a better return on their money with investments may not want to pay off their mortgage early. (However, they need to keep in mind that past performance is not necessarily indicative of future returns.)
How do you pay off a 30-year mortgage in half the time?
If you’re trying to figure out how to pay off your mortgage faster, paying more toward the principal early in the mortgage can help you cut the amount of time you spend paying off your mortgage in half. The good news is you don’t have to make double payments to cut the amount of time you pay on your mortgage in half. Because each payment will reduce the principal, you will pay less overall.
Are biweekly mortgage payments a good idea?
Biweekly mortgage payments, or half-payments made every two weeks, will add a full mortgage payment every year. Using this method can take a few years off your mortgage.
What are the risks of paying off your mortgage early?
A primary risk of paying off your mortgage early is that you won’t be able to use that money for other important financial tasks, like paying off higher-interest debts, funding your retirement, and building up an emergency fund. You may also miss out on investment opportunities that have the potential for higher returns.
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