Secrets to Paying Off Your Mortgage in 10 Years

Advertiser Disclosure |
Editorial Policy Disclosure
related category image

Point of Interest

If your only major debt is your mortgage and you’re looking toward retirement — or you’re just ready to cut down on your overall monthly expenses — now may be the right time to work on eliminating your monthly house payment for good.

If you’re looking to eliminate debt and improve your financial situation, paying off your home loan may seem like a natural place to start. If your original loan term and amortization schedule still has you making payments for another 20+ years or so, though, you may be wondering if an early payoff is even possible.

Paying off your mortgage in 10 years does take some focused effort, but with the right strategies and tools in place, you can make a big impact on your remaining principal and perhaps even pay off your home in a decade or less. So, dig up the mortgage payoff calculator and use these high-impact tips for paying off your home loan in 10 years.

How to pay off your mortgage early

Start a side hustle

The average side hustle brings in $1,122 per month and only takes, on average, an additional 12 hours per week of your time. Devoting this extra amount each month to your mortgage can make a huge dent in what you owe. You’ll need to use a loan calculator to crunch the numbers on your loan, but for someone starting a $200,000 mortgage for 30 years at 5% interest, paying an extra $1,122 each month can cut over 20 years off the repayment schedule.
If you’re able to devote more or have a partner who can also pick up a side hustle, you may be able to pay your home loan off in half the time — or 10 years flat.

Devote all your extra windfalls to your mortgage

If you’re serious about paying off your mortgage in 10 years, plan to devote any extra cash windfalls towards your mortgage. Add up your yearly tax refund, annual employee bonus, gifts, inheritance or lottery winnings, and you can likely accrue a substantial sum each year. With a 30-year mortgage at $200,000, making an extra $12,000 payment once a year will leave you just two months shy of meeting your 10-year payoff goal.

Make an extra payment each month

For a traditional repayment plan, paying twice as much each month will cut repayment time in half. But with the influence of compound interest, making an additional monthly payment works even more in your favor. For example, if you are five years into a 30-year mortgage for $300,000 at 3.5% interest, your monthly payments would be $1,347.13. Paying that amount extra each month starting today, you’d have your mortgage paid off in 9 years and 10 months.

Refinance to a 10-year term

Mortgage companies typically quote 30-year mortgages, but many lenders will issue a 10-year mortgage when asked. Refinancing to 10 years will take the guesswork out of an early payoff plan and provide a schedule for exactly how much you’ll need to pay each month to eliminate your mortgage by the close of the decade. As a bonus, interest rates on 10-year loans are often lower than those on 30-year loans, so you’ll likely pay less on interest each month for the loan.

When it’s a good idea to pay down a mortgage early 

Your mortgage is your only major debt

If you’ve cleared up all your other debts, such as car notes, student loans and credit card debt, it might be time to start paying down your mortgage. Once you are debt-free, you can work toward making other investments and wealth-building goals.

You are actively preparing for retirement

In retirement, your income will likely be lower than it is while you are working, so it’s best to plan early. If you plan to retire in the next 15 years, it may be a good idea to eliminate your mortgage payment while you are still working so that you only have to worry about regular household expenses, insurance and taxes.

You already have a liquid emergency fund

Once you start devoting a significant portion of your income toward paying down your mortgage, one unexpected emergency can completely derail your plans if you aren’t prepared. If you have already accumulated cash savings to cover 3- to 6-months worth of expenses, you’ll be in a good position to start an aggressive pay-down plan on your home.

When it’s a bad idea to pay down a mortgage early 

You have other high-interest debt

Interest rates on credit card debt and car notes are often higher than your mortgage loan, so be sure to put any extra income toward getting that debt paid off as quickly as possible first.

Your employment situation is unstable

If you lose your job, you may be forced to stop your early payoff plans or, even worse, refinance your home loan and extend your payments to make ends meet, which can really set you back from reaching your financial goals.

You have access to other high-yield investment accounts

Your mortgage is likely costing you less than 5% interest each year. If you take the same funds you would have used to pay extra on your mortgage and invest them in an account earning 10% interest or more, you’re still coming out ahead. You might be in a much better financial position after 10 or 15 years by investing that money and continuing to pay your mortgage according to its original schedule.

Paid off your mortgage early? Here’s what to do next 

Once your mortgage is eliminated, it’s important to take the proper steps to ensure the loan is closed out and all relevant parties are notified. You’ll also want to preserve your financial stability by preparing for payments that were previously handled through an escrow account, such as taxes or insurance. Those will become your responsibility once your mortgage has been paid off.

To finalize your payoff, you should:  

  1. Get documentation from your mortgage lender proving your loan is paid in full.
  2. Verify the lien has been released on your property deed, and follow up with the county recorder’s office with your paid in full documentation if the lien is still on record after 90 days.
  3. Notify your property tax assessor that your loan is paid in full. Verify that they will send all future property tax bills to you directly rather than your mortgage company.
  4. Notify your homeowner’s insurance company that your loan is paid in full and that you will no longer be making payments via escrow. This is a great time to reevaluate your coverage levels and scale up or down if needed.  
  5. Contact your mortgage company and request a refund for any amount remaining in your escrow account.
  6. Open an account to begin saving for upcoming property taxes and homeowner’s insurance. You can start with any escrow refund you may have received.