Question:

What is the best way to pay off mortgage early?

Answer:

The best way to pay off mortgage early is to simply add some extra cash to your regular monthly mortgage payment. Biweekly plans are still popular but lenders tend to charge unnecessary setup fees for those.

Making an extra principal payment on a monthly or annual basis does produce the same effect as biweekly plans and you are unlikely to be charged an extra fee for doing that. Also, when the extra monthly amount applied to your monthly regular payment is 1/12th of it, it is called "Do-it-yourself biweekly", which is what you are looking for.

"Do-It-Yourself Biweekly" - Probably the Best Way to Pay Off Home Loan Early

Consider you have a remaining $150,000 mortgage balance at 6.5% for remaining 25 years. Your monthly payment is $1,012.81 (principal and interest).

Mortgage terms Do-It-Yourself Biweekly (Adding extra 1/12 to the monthly payment - $100 /month) Bi-weekly plan Annual prepayment with one full monthly payment a year
Monthly payment $1,012.81 + 1/12 = $1112.81 26 x 2 x $ 506.41 = 13 monthly payments a year 13 x $1,012.81 principal and interest payments a year
Total Interest Cost $153,843.22 $153,843.22 $153,843.22
Total Paid Interest $119,822.25 $ 123,608.14 $122,671.54
Interest Savings $34,020.97 $ 30,235.08 $31,171.68
Years Reduced 4 years 9 months less 4 years 2 months less 4 years and 3 months less

These numbers may vary for you (but not too much) as different lenders calculate interest using different interest formulae, and may charge some fees to accept an accelerated mortgage payment plan. On the whole, this is how you could help amortize your loan faster.

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Common misspellings: mortage and morgage