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How to Pay off a Mortgage in Five Years


While homeownership is called “the American Dream,” owning a home also means taking out a mortgage for most people. And you don’t truly own your home until the mortgage is paid off, so many families want to pay their mortgage off quickly. If you really set your mind to it, you can shave years off your home loan. In this article, we’ll show you how to pay off a mortgage in five years. Consider working with a financial advisor as you consider paying off your mortgage quickly.

Mortgage rates are more volatile than they have been in a long time. Check out SmartAsset’s mortgage rates table to get a better idea of what the market looks like right now.

Should You Pay Off Your Mortgage in Five Years?

Paying off your mortgage provides peace of mind and true ownership of your home. It also eliminates one of the biggest monthly bills that most families have. By eliminating your mortgage quickly, you can refocus your money towards other goals, like early retirement, college education for the kids or a second home.

However, there’s more to it than that. While paying off your home in five years or fewer sounds like a good idea, it may not be the best strategy for you. Before starting down this path, take a look at your overall financial picture to ensure that your other goals and obligations aren’t being neglected.

You shouldn’t focus on accelerating your mortgage if you:

  • Owe credit card or other high-interest debt
  • Don’t have an emergency fund of three-to-six months of expenses
  • Have student loans outstanding
  • Aren’t maxing out your IRA and company retirement accounts
  • Haven’t saved for your child’s education
  • Don’t have adequate life and disability insurance

How to Pay off a Mortgage in Five Years

The following are some the most common strategies homeowners use to pay off their mortgage in five years or less. Step One is simply figuring out how much extra to pay each month to hit your goal. There are many free online mortgage calculators that will help you calculate your new payment.

Come up with the Money

Once you’ve got a specific dollar figure, you can lock down sources of the extra money required to climb this financial mountain. Not all of the following steps ensure success but in combination they may get you to the summit.

Cut back on spending and stick to a budget – In order to make the goal of paying off your mortgage in five years or less, most households need to cut back on spending and stick to a budget. With the goal of paying off the home loan in such a short timeframe, it is short-term pain for a long-term gain. And, you may actually decide that some of those previous purchases were more frivolous than they were necessary.

Boost your monthly income – Some homeowners may not have the necessary income to make paying off their home within five years a reality. However, they shouldn’t give up on their goal. Boosting your income with a side hustle, promotion or new job could make your dream a reality. There are numerous side hustles available and many employees are significantly increasing their income in the current job market. If you need to learn a new skill to qualify for a promotion or new job, many free online courses are available on the internet.

Establish a mortgage payoff fund – Instead of paying extra on your mortgage, you could invest the extra money in a brokerage account to create a mortgage payoff fund. This provides additional flexibility in case you change your mind or in the event of a job loss or other emergency. Additionally, you have the potential to earn a higher rate of return than your mortgage interest rate.

Apply “found” money – Even if you don’t have the monthly income to increase your monthly payment significantly, there are other opportunities to pay down your mortgage balance. Each time that you receive a tax refund, bonus from work, an inheritance or other unexpected money, apply that to your loan. These payment chunks will drop your balance quickly and reduce the overall interest that you’ll pay on the loan.

Specific Ways to Pay off Your Mortgage

Mountain climber standing in front of a mountainOnce you’ve got the financial wherewithal to start you can chose from a number of practical ways to tackle the job. The following is a list of some of the ways that successful efforts have depended upon.

Refinance to lower your interest rate – Mortgage interest may be one of the major factors that is keeping you from reducing your loan balance faster. If you still have a high interest rate on your mortgage, consider a refinance to reduce the interest so more of your payment goes towards paying principal.

Recast your mortgage – A mortgage recast is when your lender recalculates your remaining monthly payments based on the outstanding balance and remaining term. Many borrowers ask their banks to recast their mortgage after they’ve made a large lump-sum payment to reduce their balance. Alternatively, some borrowers request a recast after they’ve made numerous small payments that add up to a large reduction in their balance ahead of schedule.

Make biweekly payments – Most homeowners make their mortgage payments on a monthly basis. However, some savvy borrowers pay half of their mortgage payment every two weeks to make an extra payment every year. This bi-weekly mortgage payment accelerates your loan payoff and reduces the overall interest that you’ll pay on your loan. Plus, paying every two weeks aligns with workers who receive their paycheck on a bi-weekly basis.

Purchase, or downsize to, a smaller home – Smaller homes often mean smaller mortgages. If you’re already a homeowner, think about selling and downsizing to a smaller residence. Not only can this reduce your mortgage payment, but you may enjoy the added bonus of smaller annual property taxes and insurance costs. On the other hand, if you have yet to buy a house and you know you only want to carry a mortgage for five years, make sure you have a large enough down payment to result in a mortgage you can pay off in five years.

How to Stay Motivated

Five years can feel like a slog. It would be easy to get discouraged or just weary of the sacrifices. So think about how to maintain your motivation. Create a mortgage payoff tracker that also includes milestones. Celeberate progress. Visualize how you’ll spend or invest the extra money you’ll have once five years is up.

The Bottom Line

Mountain climber at the summitPaying off your mortgage in five years or less is possible for many homeowners if they plan appropriately. It may require cutting back on spending or increasing your income, but often it can be done. The first steps involve understanding the numbers and developing your plan of action. If you still have questions and are unsure how to make it happen, booking a meeting with a financial advisor can be a good first step.

Tips for Paying off Your Home Early

  • A financial advisor can help you develop plans to accomplish all of your financial goals, including paying off your home quickly. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
  • Your mortgage debt can play a significant role in the way you plan retirement. That’s why one of your most useful tools is a free mortgage calculator.
  • Once you’ve paid off your mortgage, your investments can grow very quickly. Without that monthly obligation, even more money can be invested to boost your portfolio. Our investment calculator can project how your money can grow based on time, contributions and rates of return.

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