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How To Pay Off a Mortgage in 5 Years


What You Need To Know

  • Being mortgage-free has benefits despite the financial commitment required to reach that goal
  • Paying down a mortgage early can help you get rid of private mortgage insurance (PMI) for good
  • Paying off a mortgage in 5 years might not be for everyone. Other options, like refinancing a 30-year mortgage to a 15-year mortgage, might be a better fit


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Just because you’ve got a 25-year or 30-year mortgage term doesn’t mean you actually have to take anywhere near that long to pay it off. You can pay off your loan much earlier. And if you’re up to the challenge, you can even pay off your mortgage in 5 years. 

It’s true, paying off your mortgage in 5 years will take tremendous effort on your part, but think of the result. You will totally own your “home sweet home”!  

And that’s not even the best part. 

You’ll also save thousands of dollars in mortgage interest. And you can use all of that newly freed up money to do things like pay for home improvements, build an emergency fund, pay off medical bills or pay down student loan debt.

If you’ve been wondering about paying off a mortgage in 5 years, you’ll need to do a cost-benefit analysis to help figure out if this would be a worthwhile pursuit. 

And, hey, it may not work for your budget now, but keep those calculations in a safe place so you’ll be ready when the time comes.

Should You Pay Off Your Mortgage Early? 3 Reasons Why

There are multiple reasons why you should consider paying off your mortgage early, including:

Peace of mind 

A mortgage is good debt, but it’s still debt. And let’s be honest, whether the debt is “good” or “bad,” it all tends to hang out in our subconscious. One 2020 study found that approximately 30% of American adults worry every day about the amount of debt they carry.[1]

Paying off your mortgage early can give you some peace of mind because you’ll know that you own your home outright, and you won’t have 25 – 30 years of monthly mortgage payments to worry about. 

More money to finance fun times

Let’s say you decided to pay off your mortgage early. Picture yourself looking at a pay stub 5 years from now, knowing that the large chunk that was once dedicated to your mortgage payment can now be dedicated to you, you, you! 

One potential reward of paying your mortgage off in 5 years is that it will free up mo’ money for mo’ fun. And by fun we mean traveling, buying luxury gifts, upgrading your car and whatever else your heart desires. And FYI, you’ll get no judgment from us if your heart’s desire is to build up your savings accounts. Growing wealth is always #goals!  

Lose interest (in a good way) 💸

When you pay off your mortgage quickly, you’re saving yourself thousands of dollars in interest and fees you would’ve paid over the life of the loan. Even one extra mortgage payment a month can save a homeowner money because that extra payment is applied directly (and entirely) to the principal balance. 

Here are some popular ways to “fast pay” your mortgage: 

  • Make one or two extra payments a month: Instead of paying once a month, you can make biweekly payments on your mortgage. Let’s say you have a 30-year, $300,000 mortgage with a 3.99% mortgage interest rate. 

    If you made a $25,000 down payment, your monthly mortgage payment would be around $1,311. When you first start repaying your loan, about $914 will likely go toward the interest payment and $397 will go toward the principal balance. (That’s because interest is prioritized at the start of your loan repayment schedule.) 

    Whenever you make an unscheduled $1,311 payment, the entire amount goes toward the principal balance. (One extra payment would be the equivalent of 3.3 months of regular payments toward your principal balance!) 
  • Make an extra payment at the start or end of a payment year: In this scenario, you save up money and make one extra payment at the beginning or end of the year. Your balance will be significantly lower, and you’ll notice that a smaller portion of your monthly payment will be going to interest the next month. 
  • Make a larger down payment: Traditionally, home buyers are encouraged to buy a home with at least a 20% down payment. When you put 20% down, you don’t have to pay private mortgage insurance (PMI). Even if you can’t afford 20%, the more you can put down, the better. 

A larger down payment reduces the amount you borrow from a lender, which means you’ll pay less in mortgage interest overall, and it may help you qualify for a better interest rate.

Stop 🛑 and Check ✅ if You Can Prepay

Before you jump in, check the terms and conditions in your mortgage agreement. 

Some mortgage agreements include a prepayment penalty fee. Typically, the fee only applies to the first few years of a mortgage and is phased out after 3 – 5 years.

Each mortgage lender has different rules concerning the prepayment fee when it applies and how much it is. If there is a prepayment fee, the fee could be based on a few different models, including: 

  • A percentage: It’s usually around 2% of your mortgage balance. This is typically applied if the loan is paid off in the first 2 or 3 years.
  • A fixed number of months’ interest: For example, your lender could charge you 6 months of interest as your fee. The number of months will vary based on your amortization schedule and your principal balance.
  • A scale based on the length of the mortgage: This is a common model. It’s usually represented by a fraction (like 2/1). So, let’s say the prepayment fee is 2/1. If you pay off your mortgage during the first year of the loan, you’ll be charged 2% of the mortgage balance you paid off. And if you pay it off in the second year of the loan, you’ll pay 1% of the balance.

It’s essential that you understand your prepayment fees (if you have them) and include them in your cost-benefit analysis.  

If the fee is 1% on a $300,000 mortgage, you’ll be fined a total of $3,000. Only you can decide if this fee is worth being mortgage-free earlier. 

Even with a large prepayment fee, the good news is that you’ll still have options. You can trim your mortgage within the lenders’ prepayment limit. 

Most lenders set limits on payments of up to 20% of the loan per year. But if you are able to pay up to the limit each year, you’ll still have a fully paid mortgage within 5 years. Keep in mind, the lower the limit, the longer it will take you to pay off the mortgage without penalties.

You can also consider refinancing your mortgage. You can refinance to get a new mortgage that doesn’t come with prepayment fees or to get a shorter loan term. 

We know–we just gave you a lot of mortgage factors to think about. Good thing we want to help you get as realistic of a picture as possible about how much you can pay on a monthly mortgage.

Mortgage Calculator

5 Ways To Pay Off Your Mortgage Early: Pros and Cons

Each approach to paying off your mortgage early comes with benefits and drawbacks. Look at all the options and consider if any of them fit your current needs and goals. 

Set a target date 🎯

A target date creates a milestone. It helps you calculate the effort you’ll need to put in to get the results you want on the appointed date. 

At times you may feel discouraged or tempted to spend that extra money (Black Friday, anyone?), but when you break your goal into smaller milestones, you’ll be encouraged to keep up the good work and make it to the finish line. 

Circle the date or set an alarm for your goal payoff date. Figure out how much you have to add every month to get to that goal. Monthly payments in smaller amounts should be less daunting than an enormous one-time payment, right? 

Pros: Having a date (or several dates) to work toward can be motivating. Buy or download a calendar and cross off every month as you make progress. And, in case you need a little motivation, feel free to celebrate as you meet and pass milestones. 

Cons: If you don’t set your dates, you’ll run the risk of giving up. We all know how life can get. If something comes up that causes you to go off track from the original plan, you might feel tempted to give up entirely. (To avoid this scenario, create a target date and an extended target date, in case financial surprises come up and delay your payment schedule.)

Supersize your payments 🍔

Making additional payments (weekly, biweekly, quarterly or annually) helps pay down the principal balance on the mortgage that much faster. Every time you make an additional payment, that extra money goes entirely to the principal balance. And every extra payment helps reduce the percentage of your payment that goes toward interest. 

Pros: You’ll pay down your mortgage faster and save on interest payments. 

Cons: Depending on your budget, a steady stream of extra mortgage payments can be difficult to manage. It’s essential that you only make extra payments if it won’t wreck your budget or get you into debt (we’re looking at you, high-interest credit cards!).  

Refinance for a lower rate

Refinancing might be key to helping you pay off your mortgage early. Refinancing can help you get a lower interest rate and reduce your loan term (think: refinancing a 30-year mortgage to a 15-year mortgage). If you’re considering refinancing, make sure you find a lender that has a minimal or no prepayment fee. With no exorbitant fee to stop you, you’ll be able to make additional payments without worry. 

Pros: Refinancing can potentially offer a better deal with more flexibility to pay off your mortgage early.

Cons: If you refinance and get a shorter term, you’re committing to higher payments. If you’re going to refinance, you’ll need to make sure that you can handle the payments. 

Boost your income: $$$

You were likely approved for your mortgage based on your current income, which might mean that you don’t have much room for extra payments. If you can, boost your income by requesting a raise, getting a higher paying job or taking on a side hustle.  

Pros: You’ll have more money to pay down the mortgage and continue to meet your financial obligations.

Cons: Money isn’t free. If you decide to work longer hours, the overtime pay may be worth it, but not if it leads to burnout or jeopardizes the quality of your work. Or maybe you’re a caretaker with no time for a side gig. Finding ways to make extra money can sometimes be challenging. If it were easy, we’d all be doing it, right? 

Bye-bye, private mortgage insurance

If you put less than 20% down to buy a home, you will likely have to pay private mortgage insurance (PMI). Once the mortgage is 20% paid off, PMI typically disappears. 

PMI can cost you hundreds of dollars every month – and none of those payments add to your home equity. Focus on getting rid of your PMI as quickly as possible to potentially save thousands of dollars. The extra money can be redirected to your mortgage loan to help you pay off your remaining balance faster. 

Pros: The faster you lose your PMI, the more money you save (and can spend) in the long term. 

Cons: You can only get rid of PMI once 20% of your mortgage is paid off. That will require room in your budget for extra payments. 

Is Paying Off Your Mortgage in 5 Years Right for You?

Choosing to pay off your mortgage early is very personal. Ultimately, you have to decide if you can make the necessary sacrifices now to benefit your long-term financial goals. 

And, of course, there’s nothing wrong with taking your full loan term to pay off your mortgage. But, if you’re confident that you can pay it off faster, you’ll enjoy the freedom of having less debt and you’ll pay less interest overall. 

Even if paying off your mortgage early isn’t in the cards for you now, it’s always an option you can pursue when you’ve got a better hand.

  1. Pew Research Center. “A Year Into the Pandemic, Long-Term Financial Impact Weighs Heavily on Many Americans.” Retrieved October 2021 from


In Case You Missed It

  1. Paying off a mortgage early can save you thousands in interest and fees and gives you peace of mind, knowing that your home is fully yours

  2. Some lenders charge a prepayment fee for mortgages that are paid off in the first 3 – 5 years of the loan

  3. There are multiple ways to approach paying off a mortgage early, including setting up a payment calendar, refinancing and boosting your income

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