How to Reduce a Mortgage by Years



A mortgage payment can be crippling to a borrower's budget.

Most mortgage terms range from 15 to 30 years in length. This time span equates to a large sum of money going towards interest payments. By increasing the amount of funds going towards principal reduction payments each year, a borrower can shorten the term of his loan by years and reduce the overall interest paid. For example, with a 30-year, fixed-rate mortgage, simply making one extra mortgage payment per year will reduce the term by seven full years.



1.Contact your current mortgage company. See if there is a free option to pay with biweekly mortgage payments. If so, sign up for the program. A biweekly mortgage payment is simply half of a monthly payment paid every other week. This equates to 26 payments per year, which is the equivalent of 13 monthly payments in a one-year period.

2.Divide your current monthly mortgage payment by 12. Add this one-twelfth payment to each monthly payment to slowly add one extra mortgage payment per year. This is a good alternative to Step 1 if your mortgage company charges for a biweekly mortgage payments. Some companies charge a fee of upwards of $4 per payment, which reduces the impact of your additional payments.


3.Consider saving up one full monthly payment, or using a bonus or commission check, to make that additional monthly payment each year. Be sure to mark the payment as "principal reduction payment" and not as a future payment to have the payment properly credited to your mortgage account.

4.Set a goal for making two extra monthly payments per year to see your mortgage term reduce even further. Reduce expenses or attempt to earn extra income to meet this goal, bit by bit each month. For the 30-year, fixed-rate mortgage, two extra monthly payments made per year will cut the term almost in half.

Tips & Warnings

  • If you have other, higher interest rate debts, such as credit card bills, pay those off first before placing extra income towards your mortgage debt reduction. Then, once those higher interest rate debts are paid in full, take all the funds that were being used to pay off those debts and place them towards the mortgage for maximum impact with little adjustment in your monthly budget.