I recently received an email from a visitor to my Money Management Solutions website who wants to learn how to pay off her mortgage quickly without having to attend expensive seminars or buy expensive software to do this trick.

I realized that this was a question a lot of people might have, especially during this current economic crisis. I decided to share my answer here for that reason.

Brenda asked Sandra Simmons:

Is there some sort of “mortgage accelerator” program where your mortgage gets paid off in a fraction of the usual 30 years time? I want to learn how I can do this myself for my mortgages. — Brenda B.

Answer:

Brenda: You can do this yourself by making extra principal payments each month.

Example if your mortgage payment is $2,000:

Mortgage Table

 If, when you make the payment for 8/1, you include an extra payment for the principal due 9/1 of $302 then you don’t ever have to pay the interest of $1,698 that was due 9/1.

Your next payment due, which you will pay on 9/1, is actually the 10/1 payment.

Then on 9/1, when you make the 10/1 payment, if you also pay the principal payment from the 11/1 payment, then you save that interest. If you do this you will cut your mortgage payoff time in half.

Write on your payment coupon “Extra Principal Payment $302” so there is no question of where you are directing the funds, and keep a copy of the coupon and the check for your records.

If you want to accelerate it even faster, say cut it by 2/3rds, if on 8/1 you make the payment and include the principal amounts for the payments due 9/1 and 10/1, then you don’t pay the interest on the 9/1/and 10/1 payments.

Then on 9/1 when you make the next payment you would pay the payment for 11/1.

Ask your mortgage lender for an amortization statement of your loan so you can actually see the correct principal and interest amounts broken down for each payment. They may not want to give you one so you can’t do this as they lose interest income, but you have a right to have it. Even if you have to pay them for it, it is worth it. Typically they charge $25 – $75 for an amortization statement.

Sandra Simmons is the President of Money Management Solutions, Inc. She specializes in helping business owners and individuals manage their money to achieve financial freedom. Claim your FREE Debt Reduction Solutions Guide.

6 Responses to “How To Pay Off Your Mortgage in Half the Time: A Do-It-Yourself Program”

  1. Nicolasa

    Great tips, thanks!

  2. Sandra

    That depends on your contract. The best way to learn the answer is to talk to your mortgage lender and go over an amortization schedule to figure that out.

  3. How to Survive an Economic Depression » Practical Alchemy

    The mortgage interest tax credit does not compensate for the interest you pay every year.

  4. Sandra

    That is very true, especially when you consider that you are paying for the tax credit with your income taxes AND you are paying the interest on the mortgage. Can you say double-paying?

  5. guest

    I don’t understand…  aren’t I always paying interest on the unpaid balance regardless of how much I paid the month before.?  loan balance = 100,000 pay balance down to 99,900 so next month I’m still charged interest on remaining balance

  6. Anonymous

    To answer your question, you will have to continue to make a mortgage payment every month that will include the interest, but you eliminate the interest due on the payment when you pay the principal amount before that payment is due.

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