How to Pay Off Your Mortgage in Half the Time

By Kandie Frederick

Growing up on the central coast, Kandie is a third generation family in the North County and a second generation family in real estate. Joining Country Real Estate in 2000, and graduating from Cal Poly in San Luis Obispo, she brings a background of Agricultural Business to combine with her knowledge of the local real estate market. Working with her family and their decades of local real estate development, she is deeply connected to the roots of our community and its growth.

You’ve probably heard you can pay your mortgage off in half the time. The good part is true: you really can knock years, sometimes more than a decade, off your loan. What usually goes unexplained is how it actually works, and that’s where people either miss easy savings or get talked into paying for something they could do free.

In the early years of a mortgage, almost all of your payment goes toward interest, not principal, because interest is charged on what you still owe. So paying off early comes down to one move: get extra money to your principal, sooner. Every extra dollar of principal is a dollar the lender never gets to charge you interest on again.

So how do you do it? Three things to know, and the last one saves you from an expensive mistake.

The biweekly method has a real limit. The most popular method you’ve heard of is biweekly payments. Instead of one payment a month, you pay half every two weeks. Because there are 52 weeks in a year, that works out to 26 half-payments, or 13 full payments instead of 12, according to Chase. That one extra payment a year goes straight to principal, and it’s a real, legitimate strategy. But here’s the part the ads tend to skip.

On a typical 30-year mortgage, that single extra payment a year only trims somewhere around four to six years off the term. That’s meaningful time and real money, but it isn’t half.

What actually gets you to half. Bigger extra principal. The more you add, the faster the balance collapses. To put a number on it, Ramsey Solutions uses the example of a $200,000 loan: adding a few hundred dollars a month to principal can pay it off more than a decade early and save tens of thousands of dollars in interest. The exact amount it takes to reach half depends on your rate, balance, and term, but the lever is always the same: extra principal.

How hard you pull it is up to you, and you don’t have to commit forever. Any month you can add extra, you do. Any month you can’t, you don’t.

The one mistake to never make. Never pay a company to do this for you. There are services that charge a setup fee plus ongoing fees to manage your biweekly payments. This past March, the U.S. Supreme Court let a $7.93 million federal penalty stand against one of the largest of them, a firm the Consumer Financial Protection Bureau said charged more than 100,000 homeowners for a service they could have done themselves for free.

The savings are real. The fee is the problem.

You can do every part of this yourself at no cost: add one-twelfth of your payment to each month, or make one extra principal payment a year. Just confirm with your servicer that the extra goes to principal, and isn’t parked toward next month’s payment, which accomplishes nothing.

That’s the honest answer to paying your mortgage off early. The savings are real, the method is simple, and you should never pay anyone for it.

If you want to see exactly what it would take for your loan, tell me your balance, your rate, and what you can realistically put toward principal, and I’ll show you the actual years and dollars it saves. Reach me at (805) 239-9566, kandie@countryrealestate.com, or visit www.countryrealestate.com for more information.