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How to Pay Off a 30-Year Mortgage in 7-10 Years

by Steve Lander

As long as your 30-year mortgage doesn't have a prepayment penalty, paying it off in seven to 10 years is relatively easy to do. While many complicated systems can help you do this, they all work on the same basic principle: If you send your mortgage lender more than your pre-set monthly payment every month, you'll pay it off more quickly. Significantly accelerating the payoff of your mortgage can make your mortgage payment go up a lot, but it will also save you money in the long run, as you pay less interest.

Contact your lender to find out your exact mortgage balance, its interest rate and the amount of your payment that goes to expenses other than principal and interest. You may also be able to find this information on a current loan statement.

Subtract the portion of your payment that goes to taxes, insurance or other expenses from your total payment to find your principal and interest payment.

Use a spreadsheet or financial calculator to find the monthly payment to achieve your desired payoff. If, for example, your mortgage balance is $249,000, your interest rate is 4.5 percent and you'd like to pay your loan off in approximately nine years, you would enter "=pmt(4.5%/12,9*12,-249000)" in an empty cell or "=pmt(0.045/12;9*12;-249000)" and press the "Enter" key, depending on the spreadsheet software you use. This calculation tells you that your monthly payment would be $2,808.12

Add any additional tax, insurance or escrow payments to your calculated principal and interest payment.

Lower your payment by refinancing to a mortgage with a lower interest rate if you can find one. To maximize your savings, consider refinancing to a shorter term loan, like a 15- or 10-year mortgage. According to Bankrate, the national average rate on a 30-year mortgage was 3.65 percent, while 15-year loans carried an average rate of 2.90 percent as of March 28, 2013. Given that refinancing may carry additional closing costs, your loan broker should be able to help you determine it if will save you money in the long run.

Make the higher payment every month. Direct your lender to apply the extra money towards your principal balance. You may need to call them, set a preference on their website, or check a box on your payment coupon to do this.

Warnings

  • Refinancing to a shorter term mortgage will force you to make the higher payment. While this is a good way to ensure that you pay your mortgage off quickly, it also could become a challenge if your income drops.
  • Avoid programs that claim to help you accelerate your mortgage payoff as they typically charge unnecessary fees.

About the Author

Steve Lander has been a writer since 1996, with experience in the fields of financial services, real estate and technology. His work has appeared in trade publications such as the "Minnesota Real Estate Journal" and "Minnesota Multi-Housing Association Advocate." Lander holds a Bachelor of Arts in political science from Columbia University.

Photo Credits

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