5 moves to pay off your mortgage in 5 years

Paying off a mortgage in a super-short amount of time comes down to mastering a few key principles. First, you need to pay down your mortgage debt aggressively. Second, you need to generate that money quickly. Finally, you need to avoid taking on any other debt that might divert money away.

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If you’re a homeowner, you know how challenging it can be to manage your mortgage and other everyday expenses. While a mortgage is often a vital part of pursuing the American Dream, it can also be a long-term financial commitment that weighs heavily on your budget. For many people, their largest single monthly expense is their mortgage payment. 

Paying off a mortgage early is often a goal for many homeowners who want to get ahead. They pay bi-weekly or add an extra payment here and there, gently shaving months off their amortization schedule wherever they can. But did you know there are some effective strategies that can help you pay off your mortgage in just five years?

While it sounds ludicrous and far-fetched, there are a few attainable strategies that can help you put a major dent in your mortgage and even erase it in just five years. 

A disclaimer about debt

Before exploring ways to aggressively pay down your mortgage, make sure you don’t have any other debt — especially high-interest debt. Credit cards, student loans, personal loans, and the like all take precedence over super-fast mortgage repayment because they generally have shorter timelines and higher interest rates. Work on slicing through any other debt you have first before you commit yourself to an expedited mortgage payback plan. 

Related: How much debt can you have if you want to buy a house?

If you’re debt-free and not in a position to need to take on any new debt in the near future, you’ll have peace of mind in your efforts to completely eliminate your mortgage — even in as little as five years.

With these principles in-mind, here’s a look at five strategies that can help you pay down your mortgage in just five years:

1. Make a substantial down payment

Before you even purchase your home, you have an opportunity to set yourself up for financial success. One of the best ways to reduce your mortgage term is by making a substantial down payment during the purchasing process. By putting down a larger sum upfront, you decrease the principal amount borrowed. In turn, that reduces the total amount you’ll pay in interest during the life of the loan.

Couple this with buying under budget and you’ll put yourself in a prime position to pay off a mortgage you’re well-equipped to handle. Say, for example, you save $60,000 for a home. Your max budget is $260,000, but you find a quaint home for $200,000. With your $60,000 down payment, your mortgage becomes just $140,000. Let’s say, all costs included, your monthly payment is $1,000/month over a 30-year term. From the get-go, you’re set up to pay extra.

You can use a mortgage calculator to estimate your monthly payments based on the size of your down payment.

2. Boost your monthly payments

Speaking of paying extra, you’ll need to get aggressive with your payments if you want to cut down your mortgage quickly. Even a modest increase in your monthly payments can significantly impact your mortgage term and overall interest paid. To say goodbye to a mortgage in five years, you’ll need to pay at least double.

Let’s say you pay $2,000 a month against your $1,000 monthly payment. In doing so, you’d accelerate the loan repayment down to about 10 years — roughly a third of the original term. Suddenly, a five-year mortgage repayment seems much more attainable.

3. Pay bi-weekly

Did you know that mortgage interest compounds daily? What this means is that every day, your outstanding balance is accruing interest. It also means that the more frequently you pay against that balance, the less principle there is to compound. Put another way: making bi-weekly (or even weekly) payments will shave time off your loan repayment schedule by reducing the amount of interest you pay.

Imagine you’re already paying double on your mortgage and will have it zeroed-out in 10 years. Now, instead of paying $2,000 once a month, imagine you pay $500 every week. That’s enough to bring your mortgage down from a 10-year payoff to just under 7.5 years! Oh, and by the way, on that repayment schedule, you’ll actually end up saving somewhere in the ballpark of $103,000 in interest payments over the life of the loan.

4. Make lump-sum principal payments

Paying more with increased frequency is the heart and soul of a five-year mortgage repayment plan; however, it’s not quite enough for that timeline. To hit the five-year mark mortgage-free, you’ll need to be disciplined in throwing more money at your mortgage. Lump-sum payments are an important part of aggressive repayment, and they need to be made directly toward principal. You can even reach out to your lender ahead of time, as part of a mortgage recast strategy, to help recalculate your monthly payments.

Think about opportunities in your life where you come into unexpected funds. Maybe you get a bonus at work? A generous estate gift from a relative after they pass away? Your tax refund? Wherever the money comes from, it should go towards your mortgage principal. If you can throw an extra few thousand dollars a year in lump sum payments at your mortgage, it’ll be enough to push you over the edge.

5. Get help paying the mortgage

Want to really accelerate your mortgage repayment? Cohabitate. Renting out part of your property to someone else is a great way to collect a rent check that goes straight toward building equity in your home. Many younger homeowners are keen on this “house hacking” trend and aren’t shy about renting out everything from a room, to a mother-in-law suite, to their garage. Any money you collect and pay toward your mortgage helps speed up the payback process. 

Theoretically, this works for any additional revenue stream. Don’t want to share your abode with another tenant? Spin up a side gig and push your profits directly toward your home. Coupled with the strategies listed above, you’ll be amazed at how fast your outstanding mortgage balance shrinks month after month. 

Bonus: Flip your mortgage away

Housing markets across the country are changing right now, which means there’s opportunity for those paying attention to market trends. You don’t need to be a professional house flipper to apply these same theories to your own timely home purchase. Buying and selling on the crest of market trends can actually leave you mortgage-less in the span of just a few years. 

Pretend you bought a house in a decent neighborhood for $200,000. You put down $60,000, meaning your mortgage is just $140,000. After two years of diligent work, you’ve got it down to $90,000. In that time, your neighborhood blossomed and now, your home is actually worth $290,00! You could, theoretically, sell for $290,000, use $90,000 to pay off your current mortgage, then buy another home in another up-and-coming area for $200,000. Voila, no more mortgage.

While this is a great scenario, it’s important to realize that it’s also akin to a gamble. Timing is everything, and not everyone is so lucky to be able to spot these types of trends or capitalize on them quickly. Remember, house flipping in any capacity carries with it risk. (If you are looking to buy and sell a house at the same time, Orchard can help.)

When you shouldn’t pay off your mortgage early

No one likes being in debt — even if it’s “good” debt, like a mortgage. But while you might be eager to pay back your mortgage as quickly as possible, There are some situations where prioritizing repayment may not be the best choice for your finances. 

Here are some common scenarios where paying off your mortgage early may not be a great strategy for you:

  • You carry high-interest debt: Before focusing on mortgage repayment, it’s critical to address high-interest debt, like credit card balances or personal loans. These debts usually have much higher interest rates than mortgage loans, so it follows that paying off these debts first will have a bigger impact on your overall financial health.
  • You don’t have emergency funds: Every person should have an emergency, or “rainy day,” fund to cover unexpected expenses or job loss. Putting extra funds into a “rainy day” fund rather than a mortgage prepayment ensures you have a financial safety net in place.
  • You’re pursuing investment opportunities: In some cases, it can be more beneficial to invest surplus funds rather than use them to pay off your mortgage early. If you have low mortgage interest rates, it’s well worth considering whether your investments can potentially generate higher returns. Conduct a thorough analysis of the potential returns on your investments versus the interest savings from early mortgage repayment. 

→ Learn whether you should pay off your mortgage or invest

Benefits of paying off a mortgage early

Paying off your mortgage early can save you tens of thousands of dollars in interest payments over the life of the loan. It can also give you greater financial flexibility and peace of mind, knowing that you own your home outright and are not burdened by monthly mortgage payments.

Paying off your mortgage early — within the next five years, even — requires discipline, careful planning, and strategic financial decisions. No matter which strategies you use, make sure they align with your financial goals. By paying off your mortgage early, you open up new opportunities and set yourself on a path to financial freedom. 

FAQs

Here are more answers to all your pressing questions about how to pay off your mortgage in five years.

Is it really possible to pay off a mortgage in five years?

Yes, it is possible to pay off your mortgage in five years if you have the financial means to do so. However, it requires a significant amount of discipline, sacrifice, and careful financial planning to achieve this goal.

What are some strategies for paying off my mortgage faster in five years?

There are several strategies you can use to pay off your mortgage faster, such as making extra payments, refinancing to a shorter-term loan, reducing your expenses, increasing your income, and using windfalls (such as bonuses or tax refunds) to pay down your mortgage.

Should I refinance my mortgage to pay it off faster?

Refinancing to a shorter-term loan (such as a 15-year mortgage) can help you pay off your mortgage faster, but it may also result in higher monthly payments. You should weigh the costs and benefits of refinancing carefully and consult with a financial advisor before making a decision.

Are there any downsides to paying off a mortgage early?

One potential downside of paying off your mortgage early is that it may tie up a significant amount of your savings and limit your ability to invest in other areas. Additionally, if your mortgage has a low interest rate, you may be better off investing your money elsewhere where you can earn a higher return.

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