How to Pay Off Your Mortgage Faster & Save Thousands
Paying off your mortgage ahead of schedule can save you thousands in interest and provide financial freedom much sooner. Here are the best strategies to help you get debt-free faster:
1. Make Extra Payments
One of the simplest ways to shorten your mortgage term is to make additional payments beyond the required monthly installment.
✅ Biweekly Payments
- Instead of paying once a month, split your monthly payment in half and pay every two weeks.
- This results in one extra full payment per year, significantly reducing your loan term and total interest paid.
✅ Lump-Sum Payments
- Use bonuses, tax refunds, or extra income to make one-time lump-sum payments on your principal.
- The more you reduce your principal, the less interest you will pay over time.
2. Refinance to a Lower Interest Rate
If interest rates have dropped since you took out your mortgage, consider refinancing to:
✔ Lower your interest rate → Reduces total interest paid
✔ Shorten your loan term → Switch from a 30-year to a 15- or 20-year mortgage
💡 Example:
A RM500,000 loan at 4% over 30 years costs RM859,347 in total payments.
Refinancing to 3% over 20 years saves over RM150,000 in interest!
🔗 Check refinance rates at: RinggitPlus, iMoney
3. Round Up Your Payments
Instead of paying RM1,850 per month, round it up to RM2,000.
✅ The extra RM150 goes directly to the principal
✅ Even small increases can knock years off your loan
💡 Example:
- RM500,000 loan, 4% interest, 30 years → RM2,387 monthly payment
- Paying RM2,500 instead saves over RM70,000 in interest and shortens your loan by 4 years!
4. Avoid Interest-Only or Minimum Payments
Some mortgage plans allow interest-only payments or lower minimum payments.
❌ Avoid these as they extend your loan duration and increase total interest paid.
✅ Always pay at least the full principal + interest amount every month.
5. Reinvest Savings into Your Mortgage
If you get a salary raise or reduce other expenses:
✔ Increase your monthly mortgage payment instead of spending the extra cash
✔ Apply savings from reduced expenses (e.g., dining out less, cheaper subscriptions) toward your mortgage
💡 Example:
Saving RM300/month from reduced expenses → Adds RM3,600/year to your mortgage → Pays off your loan years earlier!
6. Refinance to a Shorter Loan Term
Consider switching from a 30-year mortgage to a 15- or 20-year loan.
✅ Higher monthly payments, but much lower total interest
✅ Faster loan payoff, leading to huge savings
💡 Example:
- RM500,000 loan at 4% for 30 years = RM859,347 total repayment
- RM500,000 loan at 4% for 15 years = RM665,016 total repayment
✅ Saves RM194,331 in interest!
7. Offset Accounts & Mortgage Redraw Facilities
Some banks offer offset accounts that reduce your mortgage balance based on your savings.
✔ Every RM1 in your offset account reduces the amount charged interest
✔ Redraw facilities let you pay extra while keeping the option to withdraw funds if needed
🔗 Check with your bank for mortgage offset features!
8. Automate Extra Payments
✅ Set up automatic transfers from your salary account to your mortgage
✅ Ensures you never miss a payment & avoids unnecessary spending
✅ Consistency is key to long-term savings!
Final Thoughts
Paying off your mortgage early is one of the best financial moves you can make. The earlier you start, the more you save.
Best Strategies to Apply Today:
✔ Make biweekly or extra payments
✔ Round up your payments to reduce the loan faster
✔ Refinance to a lower interest rate or shorter loan term
✔ Use lump sums (bonuses, tax refunds, savings) to reduce principal
✔ Automate payments to stay on track
