The Science and Art of Paying Off Your Mortgage Early
January 22, 2019
Most of my work on paying off a mortgage early has
focused on the science of the subject, which is nothing more
than the math needed to trace the process through which a
mortgage balance (the amount still owed) declines over time.
With Chuck Freedenberg, I developed calculator 2a, which is
the most frequently visited page on my web site.
Calculator 2a allows borrowers to specify almost
any combination of extra payments, payment intervals and
payment periods, and see how the remaining balance changes
over time. And if the borrower has a target date when she
wants to be out of debt, she can work backwards to find the
combination of payments and payment intervals that will
Here is an example. After 30 months, Mabel’s
$400,000 30-year mortgage at 3.75% has been paid down to
$381,083. If she continues making the required payment of
$1852.47, she will have another 27.5 years to go, and she
plans to retire in 15 years. She is looking for a
combination of extra monthly payments and extra annual
payments that will pay off the balance in another 15 years.
Using calculator 2a, I found that an extra monthly
payment of $821 plus an annual payment of $1200 would do the
job. So would any number of other options, such as a
quarterly payment of $3600. The trick is to find the
combination that fits best into the borrower’s budgetary
process. With the calculator, it is easy. Readers will find
the calculator at
So much for the science. The art has to do with the
factors that determine whether the borrower follows through.
Based on recent work in border areas separating economics
from psychology, borrowers with a high degree of
“self-efficacy” are likely to follow through while those
with less are more likely to fail.
The self-efficacy of a person is simply that
person’s belief in themselves, and in their capacity to
affect their own future. It has been found that people with
high self-efficacy do better in school and in the workplace,
and rarely default on loans. While no one to my knowledge
has examined its connection to success or failure in
executing an early mortgage payoff plan, the presumption
that it plays a key role is very strong.
Assuming the presumption is correct, it raises the
question of whether the level of self-efficacy connected to
an early mortgage payoff plan can be affected by the way the
plan is executed? I believe that the answer to that is yes,
and that those involved in a plan will fare much better if
they follow two procedural rules.
Rule number 1 is that the extra payment is
committed at the beginning of the borrower’s pay period.
If the borrower is paid on the first day of the month, for
example, the extra payment would be sent on the second. That
assures its priority. Adopting the practice of basing the
extra payment on what remains of the borrower’s pay check at
the end of the pay period is a sure recipe for failure.
Rule number 2 is to record progress toward the goal as it occurs, continually reinforcing the borrower’s commitment. This can be done in any number of ways, including one I am looking at as I write this. It is a table I printed using calculator 2a that shows the month-by- month progress of Mabel’s mortgage, over the 180 months until payoff. Each month as she makes her payment, she can draw a black line through the existing current balance, revealing the lower balance that will emerge from her payments as the new current balance.
For best results, I suggest placing the
reinforcement tool, whatever that is, next to the checkbook.