Should I pay off my mortgage in 15 years or earlier? Not everyone has the means to pay off a mortgage in 15 years or earlier but if you can, the savings are tremendous! The reason people pay off a 30-year mortgage in 15 years is for peace of mind in owning their homes outright and to save interest on their loans.
How much money can you save by paying off your mortgage in 15 years?
Let’s look at the numbers, based on a 150k mortgage at 5% interest.
30 Year 15 Year
Monthly Payments: $805.23 $1186.19 (Increase of $380.96)
Interest Paid: $139,883.68 $63,514.28 (Savings of $76,369.40)
Total Paid: $289,883.68 $213,514.28
Wow! That is a savings of over $76,000!
What are your next steps?
How can I pay my 30-year mortgage in 15 years?
- Automating payments. You can add additional payments to your regular monthly payment through your mortgage lender. Make sure the extra money is going to principal. Also, ask your mortgage lender if the lender will charge you for paying early.
- Examine your budget, line by line. Look at your budget and make sure you are able to pay more toward your mortgage before proceeding. If not, you may be able to look at other areas in your budget for savings. For example, cable, phone, insurance. Ask yourself, “Do I need 3 billion TV channels? Am I paying too much for car insurance?”
- Have a buffer! If you don’t have a fully funded emergency fund, you may want to increase your savings before adding additional payments to your mortgage. Your emergency fund should have 3-6 months’ salary. Remember, your emergency fund can prevent you from taking on new debt! Emergencies will happen. Be prepared!
- Start with an extra payment that leaves some flexibility. When you get a raise, increase your payments, little by little. By doing this, you are less likely to miss the money.
Questions to ask before paying your 30-year mortgage in 15 years.
What are the downsides?
- Can you afford to pay extra?
- Do you have a fully-funded emergency fund for the unexpected?
- Are you investing 10% to 15% of your salary in your retirement account? If not, you may want to invest in retirement before paying off your loan early.