Is it possible to pay down home mortgage as early as cut mortgage term in half and how?


It is possible to pay down home mortgage early within nearly half the scheduled mortgage term. It is not going to happen, however, with a biweekly plan. You will have to invest some more cash than that and if paying off home loan early is what you want, here's how you do it.

How to pay down home mortgage loan at least 10 years earlier?

First, see what your lender's policy is about early house mortgage prepayment. Usually, up to 20% of the original loan balance is allowed to prepay without penalty, but there must be in-house accounting practices that you should adhere to. For example - how exactly you are paying off mortgage? The mortgage payment is debited directly from a bank account, or you are writing checks?

Then decide whether you will be making loan prepayments on an annual or on a monthly basis, and see if you will be depositing the money directly to a lender set account, or having the money debited from your accounts once a year, or every month.

After that, find out when you want to have your mortgage paid off in full. Use mortgage prepayment calculators (find one online) to calculate how much you should be paying extra annually or monthly to cut your mortgage term as much as you want. Compare your figures with a loan officer from your lender's company.

On the whole, making monthly prepayments may work better when paying down house early than the same sum applied annually because principal will be reduced on a monthly basis and less interest will be earned, correspondingly.

Cutting Down Home Mortgage Term Example

Mortgage loan balance of $150,000 at 6.5% for 30 years with scheduled prepayments from inception of the loan
Monthly payment (principal and interest) is $948.10 Monthly prepayment of $300 starting the first month Annual prepayment of $3600 applied with the first mortgage payment, and on Annual prepayment of $3600 applied with the 12th mortgage payment, and on
Years mortgage term is reduced 13 years 9 months 13 years and 11 months 13 years and 4 months
Total interest saved $98,109.57 $101,168.14 $95,035.16

The difference in the approach is not so huge, so it depends on you and your cash flow to make extra payments as it is most convenient for you. Do not forget, though, you are paying taxes and insurance with the monthly mortgage PITI payments, not only principal and interest.

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