How to pay off a 30 year mortgage early, without a refinance – Can this be done?
Absolutely, and without adding closing cost to your principal balance or paying any. You can do this all by yourself. Just start paying the 15 years principal and interest payment, plus your taxes, insurance, mortgage insurance (if applicable), and any other escrow fees.
Many people want to refinance their mortgage loan to get a shorter-term so they can pay off the original 30, 25, or 20-year loan early. They do not stop to realize they do not have to refinance their mortgage to get a shorter term.
The simplest way to do the above is to add a principal payment with your regular payment. Making sure you identify the payment as additional principal.
However, there is also another format to make sure you get it just right.
Deciding Factors of Refinance or Making More Principal Payment
Let us talk about refinance costs first. Refinancing can add more dollars to your mortgage balance unless you pay the closing cost out of pocket. These are facts that people forget to explore before going to the expense of restructuring their loans.
If you are seeking cash-out or want a lower interest rate, yes, you will need to go through your lender and complete the application process. Otherwise, you can follow our information here on how to pay off a 30-year mortgage early.
When thinking about a refinance, all options must be thought about and each one analyzed. If you need to lower your rate and payment, there is no other option but to refinance as well.
One favorable way to keep your balance at the same amount is to pay the closing cost out of pocket as mentioned above. This is what we call a no cash-out or rate/term refinance. You could also lower the term; however, with a lower term, your payment might be above what you are comfortable with making. That is the most important thing to consider.
If you get to where you need to switch back to your 30-year payment, you can do so without any worries. However, this will also make the payout of the loan increase in years.
Method for how to pay off a 30-year mortgage early
Example:
- Sales Price of $280,000 – 5.000% Down-payment =
- You have a $266,000 mortgage loan amount @ 4.750% for 30 years
- Your initial payment – principal and interest only (PI payment) = $1387.58
- Of course, there are taxes, insurance, mortgage insurance, and HOA fees (if applicable), that you pay which is the PITI payment.
- If you want to re-amortize your current balance to a lower term: simply go to your amortization schedule, or you can use your most current loan statement.
- You can then take the principal balance after payments for how many years you have paid.
- Then you use the principal balance of at that time and re-amortized your payment and pay that amount which looks something like this:
Your Home Loan Amortization Schedule
| Loan Date: 12/10/2018 Principal: $266,000.00 # of Payments: 360 Interest Rate: 4.750% P&I Payment: $1,387.58 |
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| Schedule of P&I Payments Slight differences may occur due to rounding. |
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| Pmt # | Date | Principal | Interest | Payment | Balance |
| 1 | 1/10/2019 | $334.66 | $1,052.92 | $1,387.58 | $265,665.34 |
| 2 | 2/10/2019 | $335.99 | $1,051.59 | $1,387.58 | $265,329.35 |
| 3 | 3/10/2019 | $337.32 | $1,050.26 | $1,387.58 | $264,992.03 |
| 4 | 4/10/2019 | $338.65 | $1,048.93 | $1,387.58 | $264,653.38 |
| 5 | 5/10/2019 | $339.99 | $1,047.59 | $1,387.58 | $264,313.39 |
| 6 | 6/10/2019 | $341.34 | $1,046.24 | $1,387.58 | $263,972.05 |
| 7 | 7/10/2019 | $342.69 | $1,044.89 | $1,387.58 | $263,629.36 |
| 8 | 8/10/2019 | $344.05 | $1,043.53 | $1,387.58 | $263,285.31 |
| 9 | 9/10/2019 | $345.41 | $1,042.17 | $1,387.58 | $262,939.90 |
| 10 | 10/10/2019 | $346.78 | $1,040.80 | $1,387.58 | $262,593.12 |
| 11 | 11/10/2019 | $348.15 | $1,039.43 | $1,387.58 | $262,244.97 |
| 12 | 12/10/2019 | $349.53 | $1,038.05 | $1,387.58 | $261,895.44 |
| Total | 2019 | $4,104.56 | $12,546.40 | ||
| 13 | 1/10/2020 | $350.91 | $1,036.67 | $1,387.58 | $261,544.53 |
| 14 | 2/10/2020 | $352.30 | $1,035.28 | $1,387.58 | $261,192.23 |
| 15 | 3/10/2020 | $353.69 | $1,033.89 | $1,387.58 | $260,838.54 |
| 16 | 4/10/2020 | $355.09 | $1,032.49 | $1,387.58 | $260,483.45 |
| 17 | 5/10/2020 | $356.50 | $1,031.08 | $1,387.58 | $260,126.95 |
| 18 | 6/10/2020 | $357.91 | $1,029.67 | $1,387.58 | $259,769.04 |
| 19 | 7/10/2020 | $359.33 | $1,028.25 | $1,387.58 | $259,409.71 |
| 20 | 8/10/2020 | $360.75 | $1,026.83 | $1,387.58 | $259,048.96 |
| 21 | 9/10/2020 | $362.18 | $1,025.40 | $1,387.58 | $258,686.78 |
| 22 | 10/10/2020 | $363.61 | $1,023.97 | $1,387.58 | $258,323.17 |
| 23 | 11/10/2020 | $365.05 | $1,022.53 | $1,387.58 | $257,958.12 |
| 24 | 12/10/2020 | $366.50 | $1,021.08 | $1,387.58 | $257,591.62 |
| Total | 2020 | $4,303.82 | $12,347.14 | ||
| 25 | 1/10/2021 | $367.95 | $1,019.63 | $1,387.58 | $257,223.67 |
| 26 | 2/10/2021 | $369.40 | $1,018.18 | $1,387.58 | $256,854.27 |
| 27 | 3/10/2021 | $370.87 | $1,016.71 | $1,387.58 | $256,483.40 |
| 28 | 4/10/2021 | $372.33 | $1,015.25 | $1,387.58 | $256,111.07 |
| 29 | 5/10/2021 | $373.81 | $1,013.77 | $1,387.58 | $255,737.26 |
| 30 | 6/10/2021 | $375.29 | $1,012.29 | $1,387.58 | $255,361.97 |
| 31 | 7/10/2021 | $376.77 | $1,010.81 | $1,387.58 | $254,985.20 |
| 32 | 8/10/2021 | $378.26 | $1,009.32 | $1,387.58 | $254,606.94 |
| 33 | 9/10/2021 | $379.76 | $1,007.82 | $1,387.58 | $254,227.18 |
| 34 | 10/10/2021 | $381.26 | $1,006.32 | $1,387.58 | $253,845.92 |
| 35 | 11/10/2021 | $382.77 | $1,004.81 | $1,387.58 | $253,463.15 |
| 36 | 12/10/2021 | $384.29 | $1,003.29 | $1,387.58 | $253,078.86 |
| Total | 2021 | $4,512.76 | $12,138.20 |
Using the principal balance after 36 payments of $253,000 – amortize your loan for 15 years which would be a payment of $1969 rounded. Yes, that is $581.42 more payment. This all depends upon how much more you have available to make the additional payment.
You have almost $200.00 more dollars going to principal balance which will pay off your loan in 15 years instead of the remaining 27 years. This is saving an additional 12 years of interest payments in the long run.
You are saving interest and becoming mortgage-free earlier than thought. With this method, you have not added back any closing cost to your loan that would have been with a refinance.
If you choose you could also amortize for 20 to 25 years. This plan is not for everyone, however, it is a plan for anyone who wants to save money and stop paying interest sooner. You could simply add $200 to your current payment, as principal, and it amounts to the exact same process, more or less.
As with all things mortgage, looking at all options is always a safe practice.
We have given you a lot to think about for How To Pay Off a 30 Year Mortgage Early…
