How to pay off a home loan in 5 years: Best practices

Most mortgages have a term of 15 or 30 years. Using a method called mortgage amortization, your lender calculates a payment that ensures you will pay off the loan at the end of your term. A longer term requires you to pay more interest, so paying off your loan more quickly can save you a lot of money. If you’re ambitious enough to want to pay off your loan in 5 years instead of 15 or 30, it can be done with the right strategy and enough resources to act on it. Learn some of the ways you could accelerate repayment of your mortgage to own your home free and clear in 5 years.

How much interest could you pay on a mortgage?

To understand how mortgage interest works, it helps to know that interest compounds on a home loan. To understand this, let’s assume today you borrow $350,000 with a 30-year fixed-rate loan at 6.5% interest.¹ The monthly principal and interest payment on this loan is about $2,212. Over 30 years, you make 360 monthly payments totaling $796,406. That means in addition to repaying the $350,000 you borrowed, you also pay $446,406 toward interest.

“In this scenario, you are paying back the borrowed amount more than twice if you pay over the full term,” says Baruch Mann, a personal finance expert and CEO of The Smart Investor, based in Sheridan, Wyoming. “In a high-rate environment, that’s a huge cost.”

That’s why understanding the long-term cost of interest is crucial. It adds up quickly, and minor changes to your payment strategy can have a significant impact.

Steps to pay off your mortgage faster

The good news is that you can pay off your mortgage loan more quickly and pay less for your home financing overall, with the right mortgage acceleration strategies. Here are five steps you can take toward paying off your mortgage early.

1. Understand your current mortgage terms

Review your loan terms and pay attention to your interest rate, monthly payment breakdown, how much you pay goes toward principal versus mortgage interest, and your loan term. Your principal is the amount you initially borrowed, while your interest is what the lender earns. A higher interest rate means more of your early payments over your loan term will go toward interest instead of reducing your principal balance. Considering that today’s average fixed mortgage rate is close to 7%, it makes sense to pay off your mortgage faster, which can save more money over time.

2. Reassess your budget

Carefully review your budget and eliminate any unnecessary expenses. Think about how much of your income should go to your mortgage. Any savings you generate can be directed toward repaying your mortgage.

“Go through your expenses line by line. Work on canceling unused subscriptions, reducing discretionary spending, and looking for opportunities to redirect that money toward your mortgage,” says Ryan Zomorodi, co-founder and COO of RealEstateSkills.com, based in San Diego. “Even small monthly savings – $50 here, $100 there – can shorten your loan term and reduce interest significantly when applied toward the principal.”

Online tools such as Rocket Money® can help with budgeting to pay off your mortgage.

3. Double-check your lender’s penalties

Make sure your lender won’t penalize you for early repayment of your loan. Some mortgages, particularly specialized or older loans, charge a prepayment penalty: This is a fee meant to discourage you from paying off all or part of your loan earlier than scheduled.

“Other lenders limit how much you can pay toward your principal annually without fees. And some lenders might charge a fee if you opt to recast your mortgage, which recalculates monthly payments after you make a lump sum,” Mann says. “Read your mortgage documents thoroughly and call your lender directly to confirm. If fees apply, weigh them against your potential savings. Remember that paying aggressively is smart, but not if penalties eat into what you save in total interest.”

4. Make extra payments

Now it’s time to take what you’ve saved and apply it to your mortgage principal. The most common ways to do this are through biweekly mortgage payments and principal-only payments.

When you make biweekly payments, you pay half a monthly payment every other week. With 52 weeks in a year, you’d make 26 payments, which is equivalent to 13 monthly payments instead of 12. You essentially make an extra mortgage payment per year compared with a monthly payment schedule.

You also can make extra payments and apply the amount directly to your principal.

“This reduces your balance more quickly and cuts down on future interest,” Zomorodi says. “Just be sure to label these payments as ‘principal only’ when paying online or mailing a check to your lender, otherwise your lender may apply these extra payments incorrectly.”

How much interest can I save with biweekly payments?

To demonstrate the benefits of making biweekly payments, let’s use the earlier example of a $350,000 mortgage loan at a fixed rate of 6.5% over 30 years. Assume you make 26 half payments – or the equivalent of one extra full payment each year. This will shorten your payoff to just over 24 years and save you save you $102,810 in total interest.

“It’s a small scheduling change with a big return,” Mann says. “In today’s high-interest climate, shrinking your loan life will save more than it did years ago. Biweekly plans add flexibility without requiring large lump sums up front,” says Mann.

How can I make principal-only payments?

Making principal-only payments is relatively easy. Simply try logging into your lender or mortgage servicer’s online portal and look for an option to apply extra principal payments. Alternatively, you can try contacting your lender or mortgage servicer directly via email, chat, or phone and request that extra payments be applied to your principal, not interest.

5. Apply lump-sum payments annually or when possible

Like a principal-only payment, you can make a one-time or recurrent lump-sum payment and apply it directly to your principal.

“Lump-sum payments go straight toward your principal and can make a serious dent in your balance,” says Zomorodi. “You can use tax refunds, work bonuses, commissions, side hustle earnings, or even unexpected money like an inheritance. Even one lump sum in the early years of your loan can cut months or years off your amortization schedule.”

What happens if I apply a lump-sum payment to my mortgage?

Let’s say you’ve made 12 mortgage payments so far. In month 13, you decide to make a $5,000 lump-sum payment with a bonus earned from your job. Applying the previous hypothetical (a $300,000 mortgage loan at 7% over 30 years), that single payment could net you around $30,800 in interest over the life of your loan and shorten your repayment term by 17 months.

How can I pay my house off in five years, you wonder? This is possible by applying sizable lump-sum payments. With a $300,000 loan at 7% interest, you would need to make a one-time lump sum of around $213,339 in month 13 and continue to pay your regular $1,996 monthly payments to accomplish this goal.

Or, instead of making one lump-sum payment, you could apply equal annual lump-sum payments at the start of repayment years two, three, four, and five. That means your four extra annual payments would need to be $59,459 each – separate from your regular monthly mortgage payments of approximately $1,996 – if you wanted to repay your loan in full after five years.

Other ways to pay off the home loan in 5 years

Making accelerated or lump-sum payments isn’t the only way to pay off a home loan faster. Here are some other options to ponder.

Consider refinancing

Refinancing your mortgage loan to a shorter term – such as going from a 30-year to a 15-year term – can ideally help you lock in a lower interest rate and pay less in total interest.

“Your monthly payments will jump with a refinance to a shorter-term, but the interest you will save is significant,” says Zev Freidus, president of ZFC Real Estate in Boca Raton, Florida. “However, refinancing won’t help if your new rate plus closing costs are not materially better than your current loan or if it drains your emergency funds.”

Be sure to understand the mortgage refinance requirements involved before committing. Keep in mind that refinancing won’t help if your new rate plus closing costs are not materially better and offset the current rate and term. Consider doing a break-even analysis and preserving your emergency savings.

Consider using a HELOC

Another way to repay your home loan debt swiftly is via a home equity line of credit, commonly known as a HELOC. This is a second mortgage that allows you to borrow against your home equity. A HELOC works like a credit card that uses your home’s value as collateral, enabling you to access the funds as you need them.

“You can use a HELOC as a strategic tool, drawing on it to make lump-sum payments toward your mortgage loan principal, then using your income to aggressively pay down your HELOC, which ideally will charge a lower rate than your mortgage,” says Zomorodi. “But this tactic only works if you are disciplined with cash flow and can manage the variable interest charged by a HELOC. It’s not for everyone, but it is a strategy that can work if used correctly.”

Rocket Mortgage® currently doesn’t offer HELOCs.

Pros and cons of paying off a mortgage early

As with any personal-finance decision, early repayment of your mortgage has advantages and disadvantages.

Pros

The benefits of paying off a mortgage early include:

• Saving thousands on interest. Making extra payments directed toward your principal decreases the interest you pay.
• Accelerate home equity growth. Because extra payments reduce your principal balance, you owe less on your mortgage more quickly. That means you own a larger stake in your property more quickly – another way of saying it builds equity that you can borrow or turn into profit when you sell the home.
• Increasing your net worth. “That freed-up money can go toward retirement, savings, or even early freedom from work. With inflation and living costs rising, having no mortgage makes your budget more flexible,” says Mann.
• Peace of mind. Earning financial freedom from mortgage payments is a big plus.

Cons

Then again, early mortgage repayment has its downsides, including:

• Reduced liquidity. Before applying extra dollars toward your home loan, you should have an emergency fund large enough to pay 3 – 6 months of expenses. Remember that paying down your mortgage ties up cash in home equity, which is not as easily accessible as funds in a savings account.
• Lost opportunity cost. Dollars devoted to an early mortgage payoff could earn higher returns invested elsewhere, such as in retirement accounts or other investments, meaning you might miss out on other financial opportunities.
• Prepayment penalties. Don’t forget that some home loans come with prepayment penalties. Review your mortgage documents carefully and consult with your lender to learn if a penalty applies.

The bottom line: It is possible to pay off your mortgage early

You can decrease your total interest paid, accrue equity more quickly, and increase your overall financial flexibility by paying off your mortgage earlier than scheduled. It’s even possible to pay off a home loan in 5 years with significant extra payments. Just be sure to weigh the pluses and minuses carefully, including prepayment penalties and decreased liquidity.

Interested in refinancing? Check out refi opportunities with Rocket Mortgage.

This article is for informational purposes only, and is not a substitute for professional advice from a medical provider, licensed attorney, financial advisor, or tax professional. Consumers should independently verify any service mentioned will meet their needs.

¹ An interest rate of 6.5% (6.791% APR) is for the cost of 2.00 point(s) ($7,000.00) paid at closing. On a $350,000 mortgage, you would make monthly payments of $2,212.24. Monthly payment does not include taxes and insurance premiums. The actual payment amount will be greater. Payment assumes a loan-to-value (LTV) of 80.00%. Rates and pricing information as of Nov. 18, 2025.