How can you pay your mortgage off in half the time on the 30 year mortgage without refinancing?

Answer 1

The quickest way is to simply send in more money each month than you must. You can always pay more than your minimum payment, and that will pay off the mortgage faster.

Just one note about the previous answer: Be sure to designate all extra money you send to be applied toward your principle.

It's true, if you pay more each month and have it go to principle, you can pay off your mortgage in less time. However, did you know that for the first year of your mortgage you're actually paying 500% interest to the bank? That's insane! Bi-monthly payments also don't do very well, because you still pay twice the value of your home in interest by the time the mortgage is paid off. Why would anyone do that? Sure, you pay off a 30 year mortgage in 15 to 20 years. But what do you have to show for it? Just a home that you own. Why not pay less in interest to the bank and more in principle WITHOUT changing your monthly payment? Not only that, but earn interest off your principle. That lets you pay off your home in 15 years and have a nice amount of $1 million afterwards. How is that possible? With a cash flow account.

It's true that your low 6% mortgage may actually be costing you 102% or more! That is because all mortgages are front end loaded, and most people either refinance or move within the 1st 5 years.

Don't listen to the previous post. This person obviously doesn't really understand how mortgages work, but has been sold a concept by a multi level marketing company. Here are just a few of my issues with this post:

"However, did you know that for the first year of your mortgage you're actually paying 500% interest to the bank?"

Really? 500%? So on a $200,000 mortgage I pay $1,000,000 in interest in the first year? Wow, that is insane. I don't know where you get your mortgages, but I don't want one like that.

"That is because all mortgages are front end loaded,"

Just not true. The interest you pay on a mortgage is based on the balance owed. If you owe $200,000 on your mortgage, and your interest rate is 5%, then you pay $10,000 in interest for the year. It doesn't matter if this is a new mortgage you just got for $200,000, or if it was originally a $1,000,000 mortgage that you've paid down to $200,000 over a number of years.

"Here in the States we can't pay everything from one account because banking laws prohibit itt"

Another ridiculous statement. I assume the poster is not talking about a checking account because that would be too obvious. You can pay all your bills from one checking account; I do. Of course, I believe he is referring to a Home Equity Line of Credit (HELOC), which is what the Money Merge Account (MMA) he mentioned earlier really is. What this poster is trying to say is this: Instead of having a traditional mortgage, get a HELOC. When you get paid, pay your entire paycheck on the HELOC, which reduces your balance (and thus, your interest). Then pay your bills out of your Heloc (which once again will raise your balance, and your interest due.)

The interest savings is based on the time the balance was lower between the time you paid the HELOC with your paycheck, and the time you borrowed your money back from the HELOC to pay your bills. If the balance averaged $3000 lower for the month, and you have a 6% interest rate on your HELOC, then you saved $15 for the month. Not terrible, but not life changing.

Of course, when you factor in that most HELOCs have a higher interest rate than a traditional mortgage, and that the interest rate on a HELOC is adjustable (while we are still near 40 year lows in interest rates), and lastly the fact that many people will tend to overspend when they aren't limited to spending the balance in there checking account, the risks with this type of strategy far outweigh the $15 a month or so benefit.

The only way to pay off a mortgage early is to pay down the balance due more quickly. There is no way accomplish this in any way that is life changing other than paying extra on the principal. The only way you'll ever pay off a HELOC is by paying more on it every month than you take back out of it (including interest you have to pay). It's not the $15 a month in potential interest savings that pays off the loan, it's paying your entire paycheck on the HELOC, and then spending less than you made. You can accomplish the same thing (and in a better way, in my opinion) by paying extra on a traditional mortgage.

By paying about 50% extra per month. An example 250,000 mortgage at 5% for 30 years, the payment would be $1,342.05. Paying $650 extra per month reduces the number of monthly payments by 182, or 15.17 years, and reduces the interest and total paid by $128,589.18.

The $650 payment is about 50% of your actual payment and drops the number of payments in half.