Tips to help pay off your mortgage early

If you’re a homeowner, the monthly mortgage payment is likely your biggest expense. Paying off the mortgage years early can open other avenues in your finances, especially for retirement or sending a child to college. It’s not easy to clear a large debt like a mortgage, but there are steps you can take to reach your goal.

• Make an extra payment toward the principal every month. Go online to Bankrate.com and look for the mortgage loan payoff calculator. It will show you the result of putting even an extra small amount on your principal each month. Note the date at the bottom that shows when the mortgage will be paid off, depending how much extra you pay each month. Ideally that will motivate you to consider adding larger amounts.

• Round up the amount you pay. If you’re truly short on cash, even rounding to the next $10 increment will help. See the round-up repayment calculator at HSH.com.

• Refinance to a lower interest rate — and send an extra amount each month toward the principal.

• Refinance with a shorter term — for instance, cutting your 30-year mortgage down to a 15-year mortgage. You will, of course, have larger payments but with a lower interest rate. The caveat is that you’ll be stuck with those larger payments should something happen. Instead, consider refinancing with another 30-year mortgage, but send in a larger fixed amount every month. You’ll need to be disciplined, but should you need extra cash in an emergency or in the event of income loss, you’ll have that breathing room and the smaller payment.

• If you get paid every two weeks, arrange with your lender to make biweekly payments. That ends up being 13 payments in a year. Ask about fees associated with biweekly payments.

• If you’re about to buy a house, especially if you have excellent credit, you might be surprised at how much a lender is willing to give you. Draw the line and remember that you’re the one who will be responsible for paying it back. Reduce the amount you’re willing to borrow. Beware: Read the fine print of your mortgage documents to be sure you won’t be hit with a prepayment penalty for paying off your loan early. If you’re about to take out a loan for a house, insist that there not be a prepayment penalty clause. If there is, go elsewhere for your loan.

David Uffington regrets that he cannot personally answer reader questions, but will incorporate them into his column whenever possible. Send email to [email protected]