Given the current economic climate, not to mention a historically low housing industry, you might be looking for ways to pay off your mortgage faster. When you think about your biggest monthly expenses, it's easy to see why paying off your mortgage makes sense. For most people, their mortgage payment is their number one biggest cost month in and month out - so imagine your monthly cash flow if you no longer had a house payment looming over your income?

There's an old saying regarding wealth: You have two ways to become richer: 1) Make more money and keep your expenses the same, or 2) Reduce your expenses and keep your income the same. Either way, you're creating a gap between the amount of money you bring home and the money you spend on bills - and that gap is wealth on your end.

I'm assuming that if you're reading this, you're mostly interested in the latter. More specifically, you want to get rid of your mortgage and effectively "give yourself a raise." So the rest of this article is going to explain several ways to pay off your mortgage ahead of schedule, rather than go into ways of making more money.

Easy Ways To Pay Off Your Mortgage Faster

At its most basic level, paying off your mortgage ahead of time is no different than paying off any loan or credit card - it's simply a matter of paying more than the minimum payment requirements. Technically, even if you only pay one dollar extra per month, you'll make some serious headway into paying down your mortgage. And you'll actually come out farther ahead than the $360 ($1 per month x 12 months per year x 30 years) because by knocking down the principle, you'll reduce the affects of compounding interest. So you could end up knocking an entire payment or two off the end of your mortgage term simply by paying one extra dollar per month.

But chances are, you're not thinking about ways to cut off just a month or two off the tail end of your mortgage, you want to knock years - maybe even decades - off your house payments. So while the $1 trick is certainly note worthy for hypotheticals (and it's not a bad idea, just so you know...), you probably want something with a little more teeth.

Paying More Early Beats Paying More Later

Like I mentioned earlier, it's the interest that really makes mortgages unbearable. By the time most people pay off their 30 year mortgages, they've actually paid three or four times the original loan amounts. And because interest is based on the remaining principle of the loan, it really adds up fast early in the loan cycle, because that's when the principle is the highest.

By making bigger payments earlier and knocking down the principle at a rate faster than "standard," you're not only paying your mortgage down with your own money, you're actually paying it down with virtual money as well. That's because the interest won't add up as high if it doesn't have the principle to base itself on.

So really, if you can only afford to make bigger payments at one time in your life, it's best to pay them earlier in the mortgage. Even if you spend a year or two making bigger payments, you'll be saving money years after you go back to paying the minimum payments, simply because that interest didn't build up very fast in the beginning.

Even just a few dollars per month can snowball into virtual savings down the road that top hundreds, if not thousands of dollars. And that's even true if you only pay extra for the first year or two. So in my humble opinion, it's best to put extra money into your mortgage early - at the time it will have the most long-term advantages.

But if you're several years into a mortgage and have only been making minimum payments, don't fool yourself into thinking "all is lost." Again, any time you pay more than your minimum, you'll be making compound "virtual" savings throughout. So if you've got a few extra dollars her and there, why not put them on your next house payment?

Every Dollar Counts

Earlier I mentioned that simply paying $1 extra per month would add up to a total cost on your end of $360 over 30 years, but would probably end up cutting more like a couple thousand dollars off the total cost of your mortgage, thanks to a reduction in interest.

And that's just $1 per month. Imagine if you paid a couple of extra dollars per month? Or set aside an extra dollar per day. That'd add up to almost $11,000 over 30 years! Again, that's not including the interest savings.

One dollar per month isn't that hard to come up with. If you break it down, it comes down to about three cents per day. The best way to come up with that extra dollar (or more) is to evaluate your spending, and look for ways to cut back without sacrificing your quality of life. I say that because if you sacrifice yourself to pay down your mortgage early, you'll eventually end up with some bad vibes, and stop paying more.

Here are just a few places where most people can shave a couple extra dollars per month without even realizing they are "saving." Just make sure you keep track of the savings and use them on your house payments:

  • Buy the next size down drink/coffee/soda once per week
  • Set your thermostat one degree cooler in the winter, and one degree warmer in the summer
  • Use grocery sacks in garbage cans instead of buying trash can sacks
  • Drive less aggressively - a lead foot costs extra gas and more wear and tear on your vehicle

These are just some simple ideas, I'm sure you can easily come up with more. I just wanted to show how easy it is to save a couple bucks here, and a couple bucks there.

A Note On Refinancing

Refinancing is a popular strategy amongst people who want to take advantage of lower interest rates, and thus lower monthly payments. Before you go looking into the refinance home mortgage shopping mode, remember that refinances usually cost several thousand dollars up front, so even if you save money through lower payments, you'll have a huge bulk payment upfront - and that money doesn't go towards anything other than the banker's pockets (it doesn't have anything to do with your mortgage principle)