There are a lot of reasons you may want to pay off your loan sooner, and there are two approaches to consider:
Convert to a shorter-term mortgage
If you convert from a 30-year to a 15-year fixed-rate mortgage, you will pay off your mortgage sooner, and pay less loan interest overall. The trade-off will likely be larger monthly mortgage payments.
Example: The Smiths have 25 years and $150,000 remaining on a 30-year mortgage at
5.25%. They are considering refinancing the $150,000 with a 15-year mortgage at 3.5%. By doing so, they will save $66,645 in interest payments over the life of the loan.
|25 years remaining on a 30-year
Make additional payments on your current mortgage
You can pay off your loan sooner without refinancing by simply making additional principal payments. Additional regular payments can add up quickly, take years off your mortgage and reduce your overall interest payments.
Example: The Smiths have 25 years remaining on a $100,000 30-year mortgage at 5%. For the remaining term of the mortgage, they pay an extra $100/month.
The mortgage will be paid approximately 6 years and 7 months earlier $22,046 total interest saved by paying sooner