How to Pay Off a 30-Year Mortgage in 15 Years

Taking out a mortgage on your home is a quick and easy way for any borrower to get their loan approved by the lender, but long-term mortgages can accumulate a lot of interest. Knowing how to pay off a 30-year mortgage in 15 years can help you avoid large interest payments down the line. 

Paying off a 30-year mortgage in 15 years can be done by making additional installments when possible, paying bi-weekly instead of once a month, and refinancing with a short-term loan. While every approach will allow you to pay off the home mortgage faster, combining a few methods will yield the best results.

Settling a mortgage before its term expires will allow you to reduce your loan’s total cost significantly, but it will probably require you to adjust or completely cut some of the expenses you have each month. Carefully consider all the options and consult your lender before making any decisions.

There Are Several Ways to Pay Off a 30-Year Mortgage in 15 Years

The most obvious way to pay off a 30-year mortgage in 15 years is to make additional installments whenever possible, pay bi-weekly, or refinance it with a short-term loan. While all three methods will allow you to pay off the mortgage faster, each approach has pros and cons.

Carefully study every option before making a decision, and don’t be afraid to combine a few methods at once. The choice should come down to your current financial situation, but make sure to always consult your lender before doing anything.

Make Extra Payments Whenever Possible

A mortgage is a fixed expense, so the simplest way to pay it off early is to start making extra payments whenever possible. Considering that your interest rate is calculated based on the principle, this will quickly reduce your loan balance and cut down the interest that would accumulate over the years.

As I already mentioned, the size of these extra installments can vary depending on your current financial situation. If your budget allows it, doubling your monthly principal-only payments is the quickest way to shorten the loan term. In fact, this is the only method that will single-handedly enable you to pay off your mortgage in half the time.

What to do when you have a limited budget? A common strategy is to make a smaller additional payment at the end of each month, as this won’t significantly increase the size of your installments. This can be done by dividing your monthly installment by 12 and paying the sum as a principal only at the end of each month. 

Another option is to make a larger installment once every three months or annually. Many people prefer to pay more whenever they have a large cash inflow, like an annual bonus or an unexpected inheritance. However, since interest quickly accumulates in the early years, less frequent installments might not be as efficient in shortening the loan’s term.

When making the installment, you need to disclose that you want it to apply to the principal, or the bank might consider it part of the following mortgage payment. Simply add a note to the additional transaction, and the bank will adjust the remaining balance. 

Whatever option you choose, make sure that your mortgage company actually accepts extra payments. Some companies may charge prepayment penalties which will negate the effects of these additional transactions, while others accept them only within a specified timeframe.

Pay Your Installments Bi-Weekly

Paying a mortgage bi-weekly means you will pay half the monthly amount every other week. While this might not seem like a significant change, it allows you to reduce the mortgage term by up to four years, saving you a ton of money on the interest.

The math behind this approach is very simple. Each year has 52 weeks, which means you will be making 26 half-payments, so you actually end up paying for 13 full monthly installments. You will get an extra payment without putting much thought into the process.

As with additional payments, remember to check with your lender or the bank whether they actually accept the bi-weekly payment system.

Refinance Your Mortgage With a Short-Term Loan

Taking out a 15-year loan is an excellent way to refinance and pay off your home mortgage early. Short-term loans typically have a lower interest rate, meaning you will save thousands of dollars in the long run.

However, this comes with some closing costs and much higher monthly installments. Calculate how much mortgage you can afford to ensure you are actually able to support this new arrangement. 

To see the balance difference between taking out a short-term mortgage vs. a long-term one, take a look at the table below.

Loan/Mortgage Term30 Years15 Years
Principal$200,000$200,000
Interest Rate2.5%2.25%
Monthly Payment$790$1,310
Total Interest$84,487$35,830
Total Paid for the Home$284,487$235,830

How to Save Money for Extra Payments or Refinancing?

While paying the mortgage in advance sounds easy with the methods I mentioned, you will have to cut down on your expenses considerably. This will help you save money for additional installments or make room in your budget that will allow you to refinance the mortgage. If you need to save up, you can do it by:

  • Downsizing your home,
  • Paying off other debts,
  • Spending less on non-essential purchases,
  • Investing in high-interest funds.

Should I Pay Off My Mortgage Early?

If the interest rate of your mortgage is high, paying it off early is always going to be a good idea. However, this often means you won’t have as many resources to pursue other endeavors. On the other hand, if your interest rate and total interest are low, it might not be bad to stick with the original term. As I already mentioned, deciding to pay it off early should be based on your finances, so make a choice that best suits your interests, needs, and abilities.