Home ownership is the American Dream. At the same time, a mortgage represents a significant financial obligation. It is true that you will owe a lot of money when you borrow to buy a home. However, there are many tax benefits and other reasons why getting a mortgage is a smart decision. In the long run, it is a wise investment as the equity in your home rises simultaneously. If the investment is a good one, it will pay for itself (and then some) over time.

Once you have a mortgage, it doesn’t mean you necessarily have to wait the full 30 years to pay it off. Savvy homeowners who have the right financial circumstances will be able to pay off their mortgage loans early, thus saving on a lot of interest fees over the entire life of the loan.

One very important thing to keep in mind is that all mortgages will have a higher interest-to-principal ratio in the earlier years. Let’s say your mortgage payment is $2,000 a month. Early on, only $300-400 of that might be going toward the principal balance with the rest being interest, PMI or other fees rolled into the loan. By the 30th year of the loan, almost all of the payment will be going toward principal. Lenders balance the risk of a high-dollar, long-term loan with this kind of amortization schedule.

With this in mind, let’s look at three sound strategies you can use to put more money toward your principal, minimize the interest you have to pay and get that mortgage loan paid off sooner.

1. Make One Extra Payment a Year

Set aside money throughout the year or use that holiday bonus. Take whatever extra money you can comfortably spare and make one extra payment toward the end of each year. Whether it’s a few hundred dollars or a few thousand, it will make a difference because it will all be going toward the principal. Most lenders now do not have prepayment penalties, so it’s in your best interest (no pun intended) to pay extra when you can.

2. Add More to Each Monthly Mortgage Payment

This is a similar strategy as number 1 above, but it will take more discipline. The idea is to put whatever extra you can toward the monthly mortgage payment. Perhaps you got a raise or your significant other moved in with you to make it a dual-income household. Take the additional money and use it to bolster you mortgage payment each month and you will see that principal balance keep going down with each statement.

3. Refinance to a Loan with a Shorter Term

Depending on your financial situation, home equity and current interest rates, you can consider refinancing your mortgage from a 30-year fixed loan to a 15-year fixed (or maybe even 10-year) loan. This is definitely a strong strategy for homeowners that are already well into their original loan, or when your income goes up significantly. Oftentimes, the payments aren’t that much more and you’ll be paying a lot less interest over the life of the new loan. Talk with an experienced mortgage advisor about your refinancing options.

These are all good (and fairly simple to follow) tips if you want to get your mortgage paid off as soon as possible. Keep more money in your pocket and take advantage of all the equity you earn over the years you own your home.

For more information about mortgage amortization schedules and refinancing to a shorter-term loan, contact Transparent Mortgage. We’ll help you look at all your mortgage options, so you can make the best decisions for your future.

Beau Hodson

Beau Hodson

About the Author Since 2003, Beau has been a mortgage professional and is a leading mortgage broker and lender in San Diego. As Founder and Senior Mortgage Advisor at Transparent Mortgage, he is truly committed to serving the needs of his clients and raising industry standards for integrity and transparency.