How to Pay Off Your Home Loan Faster

There are arguments both for and against paying off your home loan faster than its 15-year to 30-year term. While doing so may not always make financial sense, the emotional impact of ridding yourself of 15 to 30 years worth of mortgage payments can be a factor as well. Whatever your reasons, the process starts by understanding how the process works and applying it to your situation.

Instructions

1

Review your mortgage amortization schedule to determine the remaining principal balance of your loan, the number of monthly payments needed to pay it off and the interest rate of your loan. Decide how fast you want to pay off your home. For example, if you have 300 payments or 25 years remaining on your loan, you may decide you want to pay it off in 156 payments or 13 years.

2

Calculate a new monthly payment using the formula "interest rate/12 x payoff in months x remaining principal balance" as outlined in the UK-US Connections website. For example, assume your current monthly payment is $734, your remaining principal balance is $80,000, the interest rate is 8 percent and you want to pay off your loan in 156 payments. You will need to increase your monthly payment by about $94, or make a monthly mortgage payment of about $828 each month for the next 13 years.

3

Use a different method if you do not have an exact payoff date in mind but want to determine the effect of adding one extra mortgage payment per year. Divide your current monthly payment by 12, and add that result to your current mortgage payment. For example, if your current mortgage payment is $734, you will add $61 to your mortgage payment each month, which would pay off your mortgage in 167 months, or about 14 years.