How To Save Money On Mortgage Payments

4 Minute Read | September 24, 2021

If you're like a lot of homeowners, your house payment takes up more real estate than any other item in your budget.

But have you ever stopped to imagine all the things your budget could do if you didn't have a mortgage? You might dream of an extended stay at the beach: wearing your favorite wide-brimmed hat, enjoying your favorite novel, and soaking in an amazing view of the ocean. Total relaxation!

As amazing as that sounds, there's way more to paying off your mortgage than a perfect beach vacation.

Here are some perks of getting rid of your house payment early:

You'll save on interest. No one likes throwing money away on interest payments. But that's just what happens with a 30-year mortgage. The longer the bank can draw out your loan, the more money they make off you. Time to cut them off!
You'll own your home outright. When you own your home, there's no fear that it will be taken from you if you miss a payment or lose a job. It's yours, free and clear.
You'll have a huge chunk of money for whatever you want. You've been dreaming about hardwood floors ever since you moved into your otherwise-adorable 1970s bungalow. When your mortgage payment is gone, you'll be able to redirect that money to your new floors and can bid farewell to that stained carpet for good.

Sounds pretty sweet, right? Now let's talk about how you can make it happen. For the sake of this example, we'll assume you have a $150,000, 30-year mortgage with a 4% interest rate.

Use the mortgage payoff calculator and see how fast you can pay off your home!

The easiest way to shave years off your mortgage is to pay a little extra each month. Even adding just one extra payment a year knocks four years and nearly $17,000 off your mortgage! Whichever way you choose, here are four easy tips to find the money you need:

1. Pack Your Lunch (Possible Savings: $40,500)

Toting a brown bag to work every day may not sound appealing at first. But what if we told you it could save you tens of thousands of dollars years from now?

If that doesn't get you excited (and why wouldn't it?), consider this: If you trade that $10 lunch out for a ham and cheese from home, you can be mortgage-free 10 years ahead of schedule. And you'll save $40,500 in the process!

2. Alternate Your Budget Categories (Possible Savings: $14,000)

If you normally budget $50 for clothes, $50 for entertainment and $50 for coffee, try this tip: Pick two of those three categories each month to keep in your budget and put that extra $50 into your "pay off the house early" fund. That'll eventually save you more than $14,000 off your mortgage.

3. Use Leftover Money (Possible Savings: $9,000)

As soon as you get your variable bills (water, electric and gas), check to see if there's any leftover from what you originally budgeted. For example, if you budgeted $75 for gas and the bill came in at $62, put that leftover $13 toward the principal on your mortgage payment. This won't be a consistent amount each month, but if you estimate an average of $30 a month, that's still a savings of $9,000 when all's said and done.

4. Trim Your Budget (Possible Savings: $6,200)

Cancel the things you don't use anymore, like subscription boxes, cable or extra streaming services. If you've already done that, simply trim a couple of your budget categories by $10—you probably won't even notice the difference.

Put that $20 toward your mortgage payment each month and you'll pay it off a year and a half early. Plus, you'll save more than $6,200.

Three Important Reminders

Before you build extra payments into your housing budget, there are a few things you should consider:

Check with your mortgage company first. Some companies may only accept extra payments at specific times or charge prepayment penalties.
Make sure additional payments are applied to the principal and not to the following month's mortgage.
Don't shell out your hard-earned cash for a fancy-schmancy mortgage accelerator program. You can accomplish the same goal all by yourself, thank you very much!

Mission: Possible

Want to know the quickest way to cut your housing budget down to zero? Pay cash for your next home! If that's not an option, jump-start your progress by sticking with a 15-year fixed-rate mortgage and keep your monthly payment to no more than 25% of your take-home pay.

If you're ready to pay off your mortgage early, create an EveryDollar budget. It's easy, free, and takes about 10 minutes! You'll be amazed at what you can accomplish when you put your mind and your money to it.

Ramsey Solutions

About the author

Ramsey Solutions

Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people have used our financial advice through 22 books (including 12 national bestsellers) published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners.