Ways to pay off your mortgage faster

Mortgages are built to be paid off over a certain amount of time, with some common timeframes being 30 years and 15 years. The payments you make each month not only reduce your principal (the amount you borrowed) but also the interest.

That doesn’t mean your loan has to last for 30 years, however. If you sell your home, you may pay off your mortgage with the proceeds from the sale. Or, if you decide you can afford more than your regular monthly mortgage payment, you may decide to pay more on your mortgage each month. While this strategy may help reduce the amount of interest you pay overtime, it’s important to consider your full financial picture, including your emergency savings, student loans, auto loans, or credit cards.

• Make a one-time payment. For example, if you receive a tax refund, you could make a one-time payment on your mortgage and ask that it be applied to your principal. 
• Make biweekly payments. You could also choose to make biweekly payments, and round up that biweekly amount.
• Refinance your mortgage to a lower rate. Refinancing your existing mortgage could result in a lower monthly payment if you refinance with a lower rate and the same term length as what’s remaining on your current loan. You could also keep making the original higher payment from your old loan, which would help you pay off your new loan sooner and pay less interest.
• Refinance your mortgage to a shorter term. Alternatively, if you find you’ve paid off about 10 years on a 30-year mortgage, you could refinance to a 15-year mortgage to get you closer to the end date.

• Reduce your private mortgage insurance (PMI). If you made a down payment of less than 20% of the purchase price initially, or your loan required private mortgage insurance for another reason, certain steps may help you eliminate your PMI. If you can show that your home has increased in value, or you have paid down your loan balance enough, you may be able to request that your lender remove the PMI from your loan. Typically, you will need to have 20% equity (the difference between the market value of your home and what you owe on your mortgage) in your home. Depending on what type of property your home is, lenders may be required to end your PMI obligation after a certain amount of time. Other factors to remove PMI include having a good payment history, the currency of the loan, and depending upon the investor, an automated valuation model (AVM).
• Remove housing costs. If you plan to stay in your home for many years, it might make sense to expedite the payoff to remove part of your housing costs (although you’ll still need to pay applicable taxes, homeowners insurance, repairs, and upkeep).

Keep in mind that it’s important to balance your financial priorities. Before you decide to pay off your mortgage early, consider the following:

• Potential prepayment penalties. Though Wells Fargo doesn’t have prepayment penalties, you could potentially face prepayment penalties with another lender. Check your mortgage paperwork for a “prepayment penalty” or “prepayment disclosure.” Typically, a prepayment penalty is a fixed fee, but some are on a sliding scale based on how long you’ve held the loan.
• Optimally pay your debt. One common strategy for paying down debt is to try to pay more on the one with the highest interest rate first. This may not be your mortgage but could instead be a credit card or student loan. Consider other needs, as well, such as retirement savings, emergency funds, and investments.
• Tax benefits. Your mortgage payments may provide benefits that other types of credit don’t, such as a potential tax deduction. Consult your tax advisor.

We can help you understand your payment options as you’re securing your mortgage. Talk to us about your goals to determine what strategy works best for you.