Housing Finances How to Pay Off Your Mortgage in 5 Years Read the Article Open Share Drawer Share this:Click to share on Twitter (Opens in new window)Click to share on Facebook (Opens in new window)Click to share on Tumblr (Opens in new window)Click to share on Pinterest (Opens in new window)Click to share on LinkedIn (Opens in new window) Written by Mint.com Published Apr 6, 2020 - [Updated Apr 28, 2021] 8 min read Sources Advertising Disclosure The views expressed on this blog are those of the bloggers, and not necessarily those of Intuit. Third-party blogger may have received compensation for their time and services. Click here to read full disclosure on third-party bloggers. This blog does not provide legal, financial, accounting or tax advice. The content on this blog is "as is" and carries no warranties. Intuit does not warrant or guarantee the accuracy, reliability, and completeness of the content on this blog. After 20 days, comments are closed on posts. Intuit may, but has no obligation to, monitor comments. Comments that include profanity or abusive language will not be posted. Click here to read full Terms of Service. For new homeowners, 30 years of being in debt is a painful prospect. Who still wants to owe money on their home after retirement? Unfortunately, this is the timeframe on which many traditional mortgage repayment plans are set up. However, in recent years many homeowners have decided to make paying off their mortgage their #1 priority in order to live debt-free and build up their joint bank account for other important living expenses. Learning how to pay off your mortgage in five years isn’t easy, but with hard work, a strict budget, and some lifestyle sacrifices, it’s definitely within reach. Take a look at our seven strategies below to make sure you’re doing everything you can to pay off your mortgage early: 1. Make Sure Your Finances Can Handle a Mortgage First things first, you should make sure that your finances are in a solid enough position to support your upcoming down payment and subsequent mortgage payments. Spending all of your savings on a new home isn’t a smart idea, even if it would technically be enough to cover the average buyer’s 10 percent down. You should always have some funds stored away for emergencies and make sure you will be able to afford all the new bills that come along with owning a home. In addition, at the very minimum, you should estimate that it will take around 1.5x your down payment to close on a home. This factors in closing costs, required lender “cash reserves,” homeowners insurance, and other factors. For example, a house listed for $100,000 will cost you at minimum $15,000 to cover the down payment and additional charges. 2. Pay at Least 20% Down if Possible As mentioned above, 10 percent of the total home value is the average amount a consumer puts down on a home. However, you should aim to pay at least 20 percent down if you can. There are several advantages to paying 20 percent or more down. For one thing, you’re taking care of a large chunk of the total mortgage cost right off the bat, which will help you reach your goal of paying off your mortgage faster. Paying as much money down as possible also means you’ll be paying less interest on your home loan over time. The final benefit is that private lenders may often require you to pay private mortgage insurance (PMI) for any down payments under 20 percent. This extra insurance can end up costing you thousands of dollars for every year that your home equity remains under the 20 percent threshold, and can be hard to get rid of even if your loan-to-value ratio goes up. 3. Start With a 15-Year Repayment Plan Like we talked about earlier, 30 years is an awfully long time to be in debt. Instead, opt for a more aggressive 15-year payment plan if you can afford it. Not only will this allow you to cut your mortgage repayment time in half, but it also means you’ll be saving on at least 15 years of interest payments, meaning thousands of dollars back in your pocket. If you already have a 20- or 30-year loan and are looking to switch to a 15-year loan, you should know that there are typically fees associated with refinancing. For this reason, it’s important to calculate that your new interest rate and savings will outweigh the actual cost of refinancing. If the refinancing fees are out of your budget, or the new interest rate wouldn’t be worth the change, you can always “pretend” that you are on a more accelerated plan and adjust your monthly payments accordingly. For example, on a 30-year plan, you would simply double the number or amount of your payments to hit a target goal of 15 years. The same works with the goal of paying off your mortgage in five years, you would just need to increase your monthly payments by quite a bit. 4. Set a Specific Target Date for 5 Years If your goal is to figure out how to pay off your mortgage in five years, you will need to choose a specific date by which to accomplish your plan. It can be helpful to plan this around a holiday or birthday if you’ll want to take some time off to celebrate! By picking a specific date, you’ll be able to calculate exactly how many weeks and months you have to pay off your mortgage early and divide the total amount owed by the amount and frequency of your payments. It’s a good idea to set extra milestones for yourself to make sure you’re on track, such as 25 percent paid, 50 percent paid, etc. Keeping track of your payments in a spreadsheet is also a great way to hold yourself accountable. You can also make use of this amortization calculator to help you get an estimate and choose a specific payoff date. 5. Make Bi-Weekly Payments A good way to “trick” yourself into making extra payments is to set up a bi-weekly payment schedule instead of the typical monthly payment schedule. Simply take your monthly payment cost and divide it in two, then pay this new amount every two weeks. 52 weeks divided by two = 26 half-payments, divided by two again = 13 full monthly payments. Using this method actually works out to give you a full extra monthly payment each year versus the 12 you would normally pay, because you’re pretending that each month is exactly four weeks. However, it’s important to note that not all lenders allow you to make bi-weekly payments and some charge a fee to process the additional payments. If this is the case for you, avoid paying the extra fees by instead dividing the extra monthly payment by 12, and adding that amount to each of your current monthly fees to meet the same result. 6. Cut Expenses and Increase Monthly Income Easier said than done, right? However, striving to pay off your mortgage in five years is not an easy task, and it will likely take all of your extra financial resources to achieve. This means cutting certain luxuries out of your life and learning to live more simply. Hitting your five-year goal will require intense budgeting, and you’ll need to be paying more toward your principal than your minimum balance each month. Most extraneous expenses will need to wait as all your disposable income is being funneled to your mortgage. The simple equation is: save more than you spend. Some strategies for this that can add up in the long run include: Make lunch at home every day vs. eating out Bring your own coffee or drink the office coffee instead of buying it every day Say no to most vacations for the next few years Research budget activities such as free museum days or nearby nature areas Sell any extra furniture, clothing, gym equipment, or other non-essentials on Craigslist or at a garage sale Consider freelancing on Upwork or another platform Make use of happy hour deals for date nights Cut out expensive grocery items and choose the non-name brand foods Opt for biking or public transportation if there are good options in your area Though these tips may seem like big changes, after a few weeks you’ll get used to your new lifestyle and mindset! 7. Reward Yourself Along the Way All that being said, you likely won’t achieve your goal of paying off your mortgage early if it’s a completely joyless experience. It’s important to recognize the hard work that you’re doing and what you have accomplished so far. To coincide with your payoff milestone, you should hold parties to celebrate with friends and family. Having the support of loved ones will make your goal seem that much more achievable. In addition to milestone celebrations, give yourself a treat every once in a while. Whether it’s a fancy date night or a trip to an amusement park, you deserve to let loose and relax every once in a while. Should I Pay Off My Mortgage? Now that we’ve covered how to pay off a mortgage in five years and what lifestyle changes it’ll take, you should take a moment and consider if this is actually a doable task for you. Like we mentioned in the first strategy, you should never throw all of your savings at paying a mortgage. Maybe you technically have enough saved to pay off your principal loan, but it’s never a good strategy to have all your eggs in one basket. Throughout the mortgage repayment process, you should still have an emergency fund set aside and be contributing to your retirement savings. Don’t drain these accounts just to pay off your loan, no matter how tempting it may seem. In addition, you definitely should not rack up credit card debt in order to pay off your mortgage early. Most credit cards will have a much higher interest rate than your mortgage, so you would actually be losing money. However, if your other financial assets are secure and you have the funds to pay off your mortgage in five years, then this is a colossal achievement and you should be proud of your journey out of debt! We hope this guide to how to pay off your mortgage in five years will help you get off on the right foot when starting out as a homeowner, or as a homeowner looking to pay off your mortgage early. As always, you can visit Turbo for expert financial advice, from taxes to mortgages. 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