Easy Ways to Pay Off Your Mortgage Faster Without Breaking the Bank

Paying off your mortgage faster doesn’t have to be a financially painful experience. It’s possible to shave years and tens of thousands of dollars in interest off your mortgage without having to break the budget. In this article, I’d like to show you a few budget-friendly strategies and the big impact they can have. As you’ll see, it doesn’t take big money to make a big impact over the life of your mortgage.

First, let’s assume you have a mortgage with the following terms, which are very typical for today’s mortgage marketplace:

Loan Amount:$200,000
Interest Rate:3.875% (fixed)
Loan Term:30 Years
Principal & Interest Payment:$940.47

Interest rates are incredibly low right now, so the interest costs on this loan are already much lower than what they would have been on a similar loan just a few years ago. However, it’s still possible to save some good money here. Every little bit helps, right? Any interest saved is money that can be used for other things, like saving for retirement, sending the kids to college, or paying for home upgrades.

Let’s check out a few budget-friendly strategies that can pay off this mortgage a lot faster and save thousands in interest.

Biweekly Payments

Biweekly Payment Plan
A biweekly payment plan is a great way to pay down your mortgage faster because it often fits very easily into your monthly budget. The idea behind biweekly payments is to send half a mortgage payment every two weeks instead of one single payment every month like normal. If you’re paid every two weeks, this plan can fit very nicely into your pay schedule.

Because there are 26 two-week periods in a year, a biweekly payment plan means you make one extra full payment every year. Using our example loan above, let’s see how such a plan would impact the mortgage payoff:

Mortgage Term (Years)Total Interest
Normal Payment Plan:30 Years$138,570.70
Biweekly Payment Plan:26 Years$117,544.70
Savings:4 Years$21,026.00

As you can see, the biweekly plan shaved a good chunk off the time it takes to pay off the mortgage and reduced total interest costs by around 15%. Not bad! That’s almost enough interest saved to purchase a decent new car if you need one.

If you decide to start paying on a biweekly plan, make sure to run it by your lender first. If you just start sending half payments without prior notice, your lender may not properly credit them to your loan. You could end up being reported late to the credit bureaus, which could damage your credit.

Also, don’t let your lender charge you for the privilege of doing a biweekly payment plan. If they insist on charging, you can achieve the same thing by increasing the amount you pay every month by 8.33%. Using the example loan above, you simply multiply the principal and interest payment ($940.47) by 8.33%, which yields $78.37. This is the dollar amount that would be added to the regular payment to achieve the same result as a biweekly plan.

Rounding Up to the Nearest Hundred

Rounding Up to the Nearest Hundred
This very budget-friendly strategy involves simply rounding up your payment to the nearest hundred. For example, if your payment is $578.96, round it up to $600.00. If your payment is $1,356.12, round it up to $1,400.00. It may not seem like this would make much of a difference, but it does!

Using our example loan above, which has a monthly payment of $940.47, we would simply round up the payment to $1,000. This means that an extra $59.53 would be applied to the principal every month. That works out to less than $15 per week, which is about the cost of three mochas from Starbucks or a lunch out every week. Unless you’re on a super tight budget, that’s probably not money you would miss.

Now let’s see what kind of impact this strategy can have:

Mortgage Term (Years)Total Interest
Normal Payment Plan:30$138,570.70
Rounding Up:26 Years 10 Months$121,959.11
Savings:3 Years 2 Months$16,611.59

As you can see, for the cost of a lunch out per week, you can eliminate over 3 years from the mortgage payoff and save well over $16,000 in interest over the life of the loan. That’s a lot of impact for not a whole lot of money.

Apply Your Tax Refund to Your Mortgage

Biweekly-Tax Refund Plan
Instead of blowing your tax refund on things you don’t need, how about applying it to your mortgage? It’s already money you’re not used to having, so it won’t be missed if you invest it in your mortgage balance.

For this example, I want to show the impact of applying a tax refund to the mortgage along with a bi-weekly payment plan. Combining these two strategies can hugely accelerate the payoff of the mortgage.

According to CNN Money, the average tax refund last year was a pretty substantial $2,800. Let’s assume for this example that this same tax refund is applied to the loan every year along with a biweekly payment plan and see how things work out:

Mortgage Term (Years)Total Interest
Normal Payment Plan:30$138,570.70
Biweekly/Tax Refund Plan:18 Years 9 Months$81,662.58
Savings:11 Years 3 Months$56,908.12

Wow! Over 11 years shaved off the payoff term and nearly $57,000 in interest saved! And all it took was biweekly payments and the application of an average-sized tax refund.


As these examples show, it does take breaking the budget to pay off your mortgage years ahead of time and save thousands (or tens of thousands) of dollars in interest. Setting up a biweekly payment plan or rounding up the nearest hundred are strategies that are very easy on the budget. Throw in your tax refund and you can greatly accelerate your results.

Think about it: what would it be like to be mortgage free in less than twenty years? It might be easier than you think!