A lot of people will say "don't pay off your mortgage, just invest instead."

But I'm not speaking to that.

I'm speaking to the huge relief you'll feel when you get that debt off of your back.

The strategy I see most that doesn't really work

People think that converting your mortgage into a HELOC helps you pay it off faster.

It usually doesn't.

The reason it usually doesn't is because HELOCs usually have a higher interest rate than the mortgage you already have.

When you increase your interest rate, you set yourself back.

I like the idea behind it: it forces you to pay any leftover income toward principal. And you just operate your budget out of the HELOC instead of a checking/savings account.

But you'd have the same effect just balancing your budget to $0 at the end of each month, putting all leftover money toward the mortgage.

The HELOC strategy only works if the HELOC is at a lower interest rate than your current mortgage.

Real numbers

I'm going to use real numbers to show the impact of all of these strategies.

In this scenario let's say I bought a home for $400,000 in Texas with 5% down payment.

Let's pretend this happened around October 2023 when rates were around 7.125%

Here's what the loan would look like:

Loan Amount: $380,000

Principal and interest payment: $2,560

Mortgage insurance payment: $80 (estimate)

Property taxes: $660 (estimate, TX also has really high property taxes)

Homeowners insurance: $400 (estimate, TX does have high HOI too)

Total monthly payment: $3,700

That's 30 years, and your total interest will be $541,646 paid

Here come the strategies to lower that.

Bi-weekly 

This is the most common strategy.

It takes a restructure of your budget, switching from planning monthly, to planning your money every paycheck.

If you get paid bi-weekly, then this strategy involves setting aside half of your mortgage payment each payday.

The result?

One extra payment per year.

There are 26 pay periods, divide that in half, and you end up with 13.

That's 13 full payments per year instead of 12.

What does that do to your mortgage?

You'll pay it off in 23.6 years and pay ~$407,000 in interest instead

That's 6.4 years faster and $134,646 savings in interest.

To make it easier on my amortization chart, I took the 1 extra payment and sprinkled it over the 12 months. It has a similar effect, and adds $213.33 to your monthly payment. Here's the chart:

PaymentBalance
1$ 379,483.25
2$ 378,963.43
3$ 378,440.53
4$ 377,914.52
5$ 377,385.39
6$ 376,853.11
7$ 376,317.68
8$ 375,779.06
9$ 375,237.25
10$ 374,692.22
11$ 374,143.96
12$ 373,592.44
13$ 373,037.64
14$ 372,479.55
15$ 371,918.15
16$ 371,353.41
17$ 370,785.33
18$ 370,213.86
19$ 369,639.01
20$ 369,060.74
21$ 368,479.04
22$ 367,893.88
23$ 367,305.25
24$ 366,713.13
25$ 366,117.49
26$ 365,518.31
27$ 364,915.57
28$ 364,309.26
29$ 363,699.35
30$ 363,085.81
31$ 362,468.63
32$ 361,847.79
33$ 361,223.26
34$ 360,595.02
35$ 359,963.06
36$ 359,327.34
37$ 358,687.84
38$ 358,044.55
39$ 357,397.44
40$ 356,746.49
41$ 356,091.67
42$ 355,432.97
43$ 354,770.35
44$ 354,103.80
45$ 353,433.29
46$ 352,758.80
47$ 352,080.31
48$ 351,397.78
49$ 350,711.21
50$ 350,020.55
51$ 349,325.80
52$ 348,626.92
53$ 347,923.90
54$ 347,216.69
55$ 346,505.29
56$ 345,789.67
57$ 345,069.79
58$ 344,345.65
59$ 343,617.20
60$ 342,884.43
61$ 342,147.30
62$ 341,405.80
63$ 340,659.90
64$ 339,909.57
65$ 339,154.78
66$ 338,395.51
67$ 337,631.73
68$ 336,863.42
69$ 336,090.55
70$ 335,313.09
71$ 334,531.01
72$ 333,744.29
73$ 332,952.89
74$ 332,156.80
75$ 331,355.98
76$ 330,550.41
77$ 329,740.05
78$ 328,924.88
79$ 328,104.87
80$ 327,280.00
81$ 326,450.22
82$ 325,615.52
83$ 324,775.86
84$ 323,931.22
85$ 323,081.56
86$ 322,226.86
87$ 321,367.08
88$ 320,502.20
89$ 319,632.18
90$ 318,756.99
91$ 317,876.61
92$ 316,991.01
93$ 316,100.14
94$ 315,203.99
95$ 314,302.51
96$ 313,395.68
97$ 312,483.47
98$ 311,565.84
99$ 310,642.76
100$ 309,714.20
101$ 308,780.13
102$ 307,840.51
103$ 306,895.31
104$ 305,944.51
105$ 304,988.05
106$ 304,025.92
107$ 303,058.07
108$ 302,084.48
109$ 301,105.10
110$ 300,119.92
111$ 299,128.88
112$ 298,131.96
113$ 297,129.11
114$ 296,120.32
115$ 295,105.53
116$ 294,084.72
117$ 293,057.85
118$ 292,024.88
119$ 290,985.78
120$ 289,940.51
121$ 288,889.03
122$ 287,831.31
123$ 286,767.31
124$ 285,696.99
125$ 284,620.31
126$ 283,537.25
127$ 282,447.75
128$ 281,351.78
129$ 280,249.31
130$ 279,140.29
131$ 278,024.68
132$ 276,902.46
133$ 275,773.56
134$ 274,637.97
135$ 273,495.63
136$ 272,346.51
137$ 271,190.57
138$ 270,027.76
139$ 268,858.05
140$ 267,681.40
141$ 266,497.76
142$ 265,307.09
143$ 264,109.35
144$ 262,904.50
145$ 261,692.49
146$ 260,473.29
147$ 259,246.85
148$ 258,013.13
149$ 256,772.08
150$ 255,523.67
151$ 254,267.84
152$ 253,004.55
153$ 251,733.77
154$ 250,455.44
155$ 249,169.52
156$ 247,875.96
157$ 246,574.72
158$ 245,265.76
159$ 243,949.03
160$ 242,624.47
161$ 241,292.06
162$ 239,951.73
163$ 238,603.44
164$ 237,247.15
165$ 235,882.81
166$ 234,510.36
167$ 233,129.77
168$ 231,740.97
169$ 230,343.94
170$ 228,938.60
171$ 227,524.93
172$ 226,102.85
173$ 224,672.34
174$ 223,233.33
175$ 221,785.78
176$ 220,329.63
177$ 218,864.84
178$ 217,391.35
179$ 215,909.11
180$ 214,418.07
181$ 212,918.18
182$ 211,409.38
183$ 209,891.62
184$ 208,364.86
185$ 206,829.02
186$ 205,284.07
187$ 203,729.94
188$ 202,166.59
189$ 200,593.95
190$ 199,011.98
191$ 197,420.61
192$ 195,819.80
193$ 194,209.48
194$ 192,589.60
195$ 190,960.10
196$ 189,320.92
197$ 187,672.02
198$ 186,013.32
199$ 184,344.77
200$ 182,666.32
201$ 180,977.90
202$ 179,279.46
203$ 177,570.93
204$ 175,852.26
205$ 174,123.38
206$ 172,384.24
207$ 170,634.77
208$ 168,874.91
209$ 167,104.61
210$ 165,323.79
211$ 163,532.40
212$ 161,730.38
213$ 159,917.65
214$ 158,094.16
215$ 156,259.84
216$ 154,414.64
217$ 152,558.47
218$ 150,691.29
219$ 148,813.02
220$ 146,923.60
221$ 145,022.96
222$ 143,111.03
223$ 141,187.75
224$ 139,253.05
225$ 137,306.87
226$ 135,349.13
227$ 133,379.76
228$ 131,398.71
229$ 129,405.89
230$ 127,401.23
231$ 125,384.68
232$ 123,356.15
233$ 121,315.58
234$ 119,262.89
235$ 117,198.01
236$ 115,120.87
237$ 113,031.41
238$ 110,929.53
239$ 108,815.17
240$ 106,688.26
241$ 104,548.72
242$ 102,396.48
243$ 100,231.46
244$ 98,053.59
245$ 95,862.78
246$ 93,658.96
247$ 91,442.06
248$ 89,212.00
249$ 86,968.70
250$ 84,712.07
251$ 82,442.05
252$ 80,158.55
253$ 77,861.49
254$ 75,550.80
255$ 73,226.38
256$ 70,888.16
257$ 68,536.06
258$ 66,169.99
259$ 63,789.88
260$ 61,395.63
261$ 58,987.17
262$ 56,564.40
263$ 54,127.25
264$ 51,675.63
265$ 49,209.46
266$ 46,728.64
267$ 44,233.09
268$ 41,722.72
269$ 39,197.45
270$ 36,657.19
271$ 34,101.84
272$ 31,531.32
273$ 28,945.54
274$ 26,344.40
275$ 23,727.82
276$ 21,095.70
277$ 18,447.96
278$ 15,784.50
279$ 13,105.22
280$ 10,410.03
281$ 7,698.84
282$ 4,971.55
283$ 2,228.07

Mortgage insurance applied to principal

Here's a fun one.

Your mortgage insurance will automatically fall off once you hit 22% equity.

That's $80 per month that you can choose to route to principal and interest, without feeling it in your budget.

Here's a tip:

If your home appreciates quickly enough, you can request for the insurance to be removed sooner.

But let's pretend your home doesn't appreciate, and instead stay stagnant.

Unlikely, but let's pretend, to keep this strategy tight.

22% equity is achieved at a mortgage balance of $312,000

That was scheduled to happen at around payment number 142, or close to 12 years, on your original mortgage.

But since you switched to bi-weekly, it's now on payment 98, or about 8 years

Let's create a new chart where starting on payment 98, we route that $80 per month that just freed up, and apply it toward principal.

That balance would've been $311,565.

Without applying mortgage insurance the remaining months from that point are 186 (15.5 years) and remaining interest is $203,678.78

Once you add $80 per month to that, you lower the remaining months to 177 (save 9 months) and lower your total remaining interest to $192,195 (saving $11,483 in interest)

Cancel escrow

I broke down the monthly payment earlier.

You pay property taxes and homeowners insurance in your monthly payment.

Well, once you get that 22% equity, you're in a good position to request a cancellation of escrow holdings.

That means instead of the mortgage servicer paying your property taxes and HOI on your behalf, you pay for it yourself.

But how does that help? Couldn't that make it worse, if you mess up?

It doesn't help directly.

Your principal and interest payment stay the same. This doesn't free up any extra money to pay toward principal.

Or does it?

The biggest problem I have with escrow accounts (mortgage lender saving and paying on your behalf) is that you don't earn any interest off those accounts.

Local banks and credit unions might provide a flexible CD, where you can start with a low balance, and make contributions to it on a fixed rate.

I know you can do way better on mutual/index funds. But let's keep this example tight.

Homeowner's insurance is due annually.

Property taxes are usually due annually.

so set the money you'd normally pay toward your mortgage escrow account, and put it in an investment account.

Your investment account needs annual access to withdraw/close out each time your homeowners insurance is due, and another for property taxes.

I'm using an investment calculator for this.

Starting balance $0

contribute $1,060 per month over 12 months at 3% and you'll end up with $208.61 in interest earnings that you can apply toward the principal balance.

That's $17.38 per month on average. (this is the least effective strategy, but it's something)

That takes you from the 177 months remaining and $192,195 in interest, down to...

175 months and $189,929 in interest (saves 2 months and $2,266 in total interest)

No cost refinances

The lower the rate, the faster you can be done.

Here's a post where I show the difference a 1% rate can make at the start of the 30 year term.

I've posted in length about refinancing here. But the gist is to refinance in a way that does not set your mortgage back with expensive loan costs.

What people will say (and I'll agree with them) is you can't predict the future. You can't know if rates will ever go back down to those low points we saw in 2020.

And it's true. We can't predict the future to a degree. I don't know if rates will rocket upward tomorrow, or plummet downward.

But you can always be ready.

I can predict that rates will move around. There may be a short window where rates dip.

Example: October 2023 average rates were around 7.125% and today they're at 6.34% on mortgage news daily.

There are tools you can use, like rate alerts, from lending companies which notify you if rates reach a certain point.

Or check how the 10 year treasury yield is compared to now vs the time you bought (good indicator of where mortgage rates are)

Just remember to ask for no-cost refinance options.

No-cost refinance options put you in a position to continue to refinance and secure a lower rate without setting your mortgage balance backward.

Always go for that option, even if the rate only drops by half of a percent. If it didn't have any loan costs, then it's a win, and will allow you to pay off your mortgage much faster.

But let's pretend rates stay the same and don't move around much.

Here's the exciting part:

You only have about 15 years left at this point.

15 year rates are about 0.5%+ lower than 30 year mortgage rates.

So we left off with 175 months left, with $311,565 balance and $189,929 remaining interest.

Let's say you found a refinance option, with no cost, on a 15 year term, for 6.625% (I feel like I'm being VERY conservative here)

The trick to this is you need to keep making the exact same monthly payment you've been making.

Here's what that does:

166 months and $165,219.67 remaining interest. Savings you 9 months and about $24,710 in total interest.

Now, if you can lower your rate sooner, and for lower, then this will make an even bigger impact. But I'm trying to keep my estimates low to not sensationalize it.

The totals

So, here's the summary of what actions we take

  • Budget and pay bi-weekly rather than monthly

  • Cut mortgage insurance at 22% equity, and apply mortgage insurance difference toward principal

  • Cut escrow, invest the money, and apply interest earnings toward the mortgage

  • Refinance after ~15 years to a 0.5% lower rate

and here are the assumptions we've made to keep the outcomes conservative

  • Rates stay about the same, not dropping or rising

  • Your home never appreciates

  • You only get 3% returns on your escrow investing

This is what you'll save

  • $173.105 total interest

  • 96 months (8 years)

That's with minimal impact on your budget.

Tips to pay it off even faster:

  • Pay extra toward principal each month :) Like raises, bonuses, tax refunds, etc

  • Keep an eye on rates, and refinance sooner at $0 cost

If nothing else, I hope this post inspires you to think of creative ways you can get the mortgage monkey off your back.