Seven Ways to Pay Off Your Mortgage Early

What if I told you that you could save $21,000 on your mortgage – and pay it off four years sooner – without spending an extra dime?

Before we dive into our list of ways to pay off your mortgage early and save on interest, let's set up an example.

Taking the average housing price ($228,700) and assuming a 20% down payment, we're going to have a 30-year mortgage of about $182,960. If we go with today's interest rate (4.06%), we'll be paying $133,778.05 in interest on our mortgage. (We gathered these averages from the National Association of Realtors.)

Tip No. 1: Switch to biweekly payments. This by far is the easiest way to cut back your interest payments and save you the most in the long run. Using our example above, switching from monthly to biweekly payments will cut four years off your mortgage and save you $21,970.12 in interest payments. Not only are you making an extra monthly payment per year, but increasing the frequency helps cut down the interest.

Tip No. 2: Add an extra month's payment. If you take one month's payment and divide it by 12, you can add that small amount to each month's payment. That effectively adds a full extra payment each year. It will still cut off about four years, but due to interest rates, this method will only save you $20,851.17.

Tip No. 3: Combine tips 1 and 2. This might seem obvious, but the payoff is incredible. If you switch to biweekly payments, you'd be paying $439.91 every two weeks. If you add 1/26th of $439.91 to each payment, you'd only be paying $456.61 – just an additional $16.90.

Now, stay with me here. Paying $456.61 every two weeks will cut your mortgage by almost six years and save you $29,250.75 in interest!

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Tip No. 4: Add small amounts to your payments each period. It might seem obvious, but the savings add up tremendously. You can try rounding up your payment to the next $10, $50, or more. In our example, adding just $20 to a monthly payment can save you $6,495.70 in interest... and you'll save even more if you switch to biweekly payments. In fact, in our example, adding just $20 to a biweekly plan will save you $30,598.47 in interest.

Tip No. 5: Make lump-sum payments. Put that tax refund or annual bonus toward your mortgage. And if you receive other payments – say from an inheritance or a lucky night at the casino – put those toward your debt too. On our monthly payment plan, putting in a $500 bonus will save you $1,178.35 in interest.

Tip No. 6: Utilize Bonds and CDs. When deciding where to put your money when a bond or CD matures, always go with the highest interest rate. For example, if I have a bond that matures and bonds are only yielding 1% interest, but my mortgage has a 5% interest rate, I'm going to put that money toward my mortgage instead of reinvesting.

Tip No. 7: Use that cash back program. Right now, Wells Fargo is offering its mortgage customers a great deal. You can get a Visa card through them with 1% cash back that goes directly toward your mortgage.

If your mortgage is elsewhere, you can still find a good cash back plan and use the money to pay off your debt in small payments added each period. Some of the highest-rated cards are Discover's It card, American Express' Blue Cash Everyday card, Chase's Freedom card, Capital One's Quicksilver card, and Fidelity's Investment Rewards card.