mortgage

4 ways to pay off your mortgage early and calculate the savings

Refinance with a shorter-term mortgage
Refinance with a shorter-term mortgage | Aleksandar Nakic/Getty Images

Refinance with a shorter-term mortgage

Want to make sure your mortgage is paid in 15 years? Refinance to a 15-year mortgage.

Let's say you got a 30-year, fixed-rate mortgage for $200,000 at 4.5%. Then, 5 years later, you can refinance into a 15-year loan at 4%. Doing so pays off the mortgage 10 years earlier and saves more than $60,000 (if you exclude closing costs on the refi).

Minimum payments only
Monthly principal and interest, years 1-5$1,013.37
Monthly principal and interest, after year 5$1,013.37
Years and months to pay off loan30 years
Interest rate4.5%
Total interest$164,813.42
Refinance to 15-year fixed
Monthly principal and interest, years 1-5$1,013.37
Monthly principal and interest, after year 5$1,345.45
Years and months to pay off loan20 years
Interest rate4%
Total interest$103,539.27
Your savings$61,274.15

Those shorter-term mortgages often carry interest rates a quarter of a percentage point to three-quarters of a percentage point lower than their 30-year counterparts, Tyson says.

But this option is not quick or free. You must qualify for a new mortgage -- which means paperwork, a credit check, and, likely, a home appraisal. Plus closing costs.

Try the refinance savings calculator now to see if this is a good option for you.

And even with a lower interest rate, that quicker payoff means higher monthly payments. And this method is a lot less flexible. If you decide that you don't have the extra money one month to put toward the mortgage, you're locked in anyway.

Unless the new interest rate is lower than the old rate, there's no point in refinancing, says Doelger.

Without a lower rate, you'll get all the same benefits (and none of the extra costs) by just increasing your payment a sufficient amount, he says.

RATE SEARCH: Shop today for a 15-year fixed.

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