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Affinity Title

MORTGAGE KNOWLEDGE CENTER

PenFed Mortgage with Confidence

Home Buying Steps

  • Getting Started
  • Finding a Home
  • Getting a Mortgage
  • Home Ownership

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  • VA Loans
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image

CONVENTIONAL LOANS

Rates starting at % (APR %)¹

 

Apply before becoming a member.

After your application, we’ll help you:

1. Discover you’re eligible to become a PenFed member

2. Open a Savings/Share Account and deposit at least $5

  1. Home
  2. Mortgage Knowledge Center
  3. Smart Strategies for Paying Off Your Mortgage Faster

MORTGAGE

Best Way to Reduce Mortgage Term

What You'll Learn: How to pay down the principal, recast a mortgage, or refinance to a shorter term

EXPECTED READ TIME:4 minutes

May 19, 2023

Smart Strategies for Paying Off Your Mortgage Faster

You signed on the dotted line for a set mortgage term, but that doesn’t mean your payments are set in stone. Wondering how to pay less interest on your mortgage? There are multiple ways to pay off a mortgage early, saving you money in the process. Explore multiple ways to pay off a mortgage faster with tips to help decide the best option for you.

Pay extra on the principal

Whether you’re talking about a 30-year mortgage or a home equity line of credit (HELOC), you’ll pay less interest when reducing a mortgage principal. That’s because the interest you pay is based on the principal balance. Here are some options to reduce how much you owe on your mortgage:

Pay extra each month

A great way to see progress month after month is to increase your current mortgage payment. Simply include additional funds in your autopay and ensure the extra portion is directed toward the principal. Every little bit helps. Say you have a $550,000 mortgage with a 5% interest rate and monthly payment of $2,952. Using an extra mortgage payment calculator, you can see that adding just $50 extra per month can save you over $20,000 in interest and cut a year off the loan.

Schedule biweekly payments

Consider this: If you cut your mortgage payment in half and increase the frequency from monthly to biweekly, you’ll end up making one additional mortgage payment every year – and likely not even notice the change. Those extra mortgage payments will add up year after year.

Pay an extra lump sum

Have a tax refund coming? Bonus from work? Inheritance? Make a promise to yourself if you receive a lump sum of cash throughout the year, it’ll go straight to the mortgage. This can be a more aggressive way to shorten a mortgage duration, especially when combined with other options.

Recast your mortgage

A mortgage recast, or re-amortization, is a helpful tool offered by some lenders to lower your mortgage payment by paying down the principal. If you have a conventional conforming or jumbo loan, a recast can be a great way to reduce your mortgage term and pay less interest over the life of the loan without refinancing.

Here’s how it works:

  • You put a large payment toward your mortgage.
  • Your lender then recalculates your payment based on the new balance.
  • You enjoy a lower monthly mortgage payment.

An important note: A recast keeps your current interest rate and length of mortgage term. So if you want to pay off your mortgage earlier, consider allocating the same amount as previously. For example: If you were paying $2,150 per month before the recast and are only required to pay $1,950 after, continue paying $2,150 (or more!) to help you pay off the mortgage sooner.

Refinance to a new term

Extra payments on your own can get the job done, but maybe you want more commitment or accountability for paying off a mortgage faster. In that case, refinancing to a shorter term can ensure you keep up with a more aggressive payment schedule and reap interest savings. If you have a 30-year mortgage, you could refinance to a 15-year or even 10-year term.

A mortgage refinance replaces your current mortgage with a new one. With it comes a new interest rate. Shorter term loans typically have lower rates, but that’s in comparison to the current state of rates. Although there are no hard and fast rules, it’s typically recommended to refinance when you can lower your rate by enough to make financial sense.

At the end of the day, any combination of these options can help get you closer to your early mortgage payoff goals. Whether you want to retire without a mortgage or just add room to your budget, choose from the above ideas, and you’ll be sure to make significant progress.

For more information about PenFed Mortgages:
 

PenFed Mortgage: 

800-970-7766

Get Started

SIMILAR ARTICLES

How to Pay Off a Mortgage Faster With a 10-Year Fixed Mortgage | PenFed Credit Union

Paying off a mortgage faster is a goal of many homeowners. Find out how to do it with refinancing to a shorter term, what the rates could be, and the biggest advantages.

couple downsizing house

Advantages of a Mortgage Recast | PenFed Credit Union

Find out what a mortgage recast is and how you can use one to your advantage in a competitive seller's market. Find out more about re-amortization.

empty nester

Should I Refinance to a 15-Year Mortgage? | PenFed Credit Union

Thinking about refinancing to a 15-year mortgage? From saving on interest to building equity faster, discover the pros and cons of this type of refi.

Credit Union Refinance

What Are the Benefits of Refinancing to Reduce the Term (Length) of My Mortgage? | PenFed Credit Union

What are the home refinancing pros and cons? When should you refinance your mortgage for a shorter term - and when should you not?

55+ communities
image

CONVENTIONAL LOANS

Rates starting at % (APR %)¹

 

Apply before becoming a member.

After your application, we’ll help you:

1. Discover you’re eligible to become a PenFed member

2. Open a Savings/Share Account and deposit at least $5

Home Buying Steps

  • Getting Started
  • Finding a Home
  • Getting a Mortgage
  • Home Ownership

Mortgage Topics

  • VA Loans
  • Conventional Loans
  • First Time Homebuyer
  • Home Equity
  • Homebuying 101
  • Checklists
  • Adjustable Rate Mortgages
  • PenFed Top 10
  • Refinance
  • Jumbo Loans
  • FHA
  • Videos

Mortgage Products

  • Mortgage Center
  • Refinancing
  • Home Equity

PenFed HELOC

Rates as Low as % APR* with flexible use of funds

Apply before becoming a member.

After your application, we’ll help you:

1. Discover you’re eligible to become a PenFed member

2. Open a Savings/Share Account and deposit at least $5

Disclosures

1Except for holidays, rates are updated Monday through Friday at 10:15am EST. The advertised rates and points are subject to change. The information provided is based on discount point, which equals percent of the loan amount, and assumes the purpose of the loan is to purchase a property with a 30-year, conforming, fixed-rate loan. Loan amount of $400,000; loan-to-value ratio of 75%; credit score of 760; and DTI of 18% or less. The property is an existing single-family home and will be used as a primary residence. The advertised rates are based on certain assumptions and loan scenarios, and the rate you may receive will depend on your individual circumstances, including your credit history, loan amount, down payment, and our internal credit criteria. Other rates, points, and terms may be available. All loans are subject to credit and property approval.

*Prime Rate is % as of . The APR for this Home Equity Line of Credit (HELOC) is based on prime plus a margin and can change monthly. Fixed Rate Advances will be amortized over the Fixed Rate Advance Term, with the payment consisting of principal and interest. Your Annual Percentage Rate for a Fixed Rate Advance will be calculated by adding your Prime Rate, your Margin, and the Additional Fixed Rate Lock-In Margin. Your Annual Percentage Rate for a Fixed Rate Advance shall not exceed 18% and shall be equal to or greater than % for primary residences and second homes.

  • Annual Fee: Notwithstanding the foregoing, an annual fee of $99 will be assessed on each account anniversary.
  • Home equity lines of credit (HELOC) are variable rate loans and the interest rate is subject to increase after consummation of the loan on monthly basis. Closing costs range between $500 and $8,500 for credit lines of $500,000. Contact a representative for additional details.

Appraisals: PenFed will attempt to establish value via an independent method. If that method is unsuccessful, or the value is not sufficient for the amount requested, an appraisal will be required regardless of CLTV. An appraisal is always required in the following circumstances:

For all loans with a loan amount greater than $400,000.

If an appraisal is required, it must be ordered by PenFed. You will be contacted for authorization and payment prior to ordering. Appraisal fees average $550 to $850 (some run higher).

  • Closing Cost Credit: PenFed will pay most closing costs associated with a home equity line of credit (HELOC), which includes credit report, flood certification, settlement/closing, property ownership and encumbrances search, recording, property search, and quick close. Member is responsible for any city, county, and/or state taxes if the subject property is located in FL, LA, MD, MN, NY, TN, or VA. If an appraisal is required, the member, who is responsible for the fee whether or not the loan closes, will pay the cost.

Interest may be tax deductible, consult a tax advisor for further information regarding the tax deductibility of interest and charges.

Fixed Rate Advance Lock-In You may lock in an Annual Percentage Rate for Advances during the Draw Period. During your Draw Period, you may choose to have three separate Fixed Rate Advances locked in at any one time, with a maximum of two new Fixed Rate Advances per calendar year. Each Fixed Rate Advance must equal or exceed Ten Thousand Dollars ($10,000.00) and you may not request a Fixed Rate Advance that would cause the amount you owe to exceed your Credit Limit. The only term option for your Fixed Rate Advance is 240 months (“Fixed Rate Advance Term”). However, the term of your Fixed Rate Advance cannot exceed your Repayment Period.

Fixed Rate Advances will be amortized over the Fixed Rate Advance Term with the payment consisting of principal and interest. Your Annual Percentage Rate for a Fixed Rate Advance will be calculated by adding your Prime Rate, your Margin and the Additional Fixed Rate Lock-In Margin. Your Annual Percentage Rate for a Fixed Rate Advance shall not exceed 18% and shall be equal to or greater than % for primary residences and second homes and 4.75% for investment properties.

Property Insurance: Property insurance is required.

Multiple PenFed Loans: Multiple PenFed Equity loans and HELOCs are available as long as the member and collateral qualify (except Texas). For Equity loans and HELOCs the total indebtedness cannot exceed $500,000 for all PenFed Equity and HELOCs combined.

PenFed does not lend on:

  • Mobile homes
  • Co-ops or time-shares
  • Properties that are currently listed on the market for sale
  • Commercial property or property used for commercial purposes, even if a residence is part of the property
  • Undeveloped property (land only)
  • Properties with more than 4 units

Properties that are currently under major construction/renovations: Property must be fully livable, with no safety issues. (Examples: no missing rails from stairs/decks, no open walls with wires showing, missing kitchen appliances/counters, missing bath fixtures or unfinished pool).

  • Additional limitations may apply

Home Equity Line of Credit:

  • This Account has a Draw Period of 10 years, followed by a repayment period of 20 years.
  • If only minimum payments are made during the draw period, the loan balance will not decrease.
  • In Texas, the maximum CLTV available is 80% on owner occupied properties. Additional restrictions apply in Texas, so please ask a representative for details.
  • In all other states, the maximum CLTV is 85% on owner occupied properties and second homes. Additional restrictions or requirements may apply based on application characteristics.
  • Property type of Condo has a maximum CLTV of 80%.
  • The maximum CLTV available is dependent on credit qualification.
  • Rates vary depending on owner occupancy and CLTV and other loan criteria.

Minimum Loan Amount Requirements in all States:

  • For an owner occupied property or second home the minimum loan amount is $25,000 and the maximum amount is $500,000 with a CLTV of 85% or less of the fair market value.

Other terms and conditions apply; call 844-918-4307 to speak with a representative for details. All rates and offers are subject to change without notice. To receive advertised product, you must become a member of PenFed.

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This credit union is federally insured by the National Credit Union Administration. Rates are current as of September 2023 unless otherwise noted and are subject to change.

APY = Annual Percentage Yield
APR = Annual Percentage Rate


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Routing #256078446

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IMPORTANT NOTICE

You are leaving PenFed.org and entering a third party Website that is not a part of Pentagon Federal Credit Union.


The content you are about to view is produced by a third party unaffiliated to Pentagon Federal Credit Union. PenFed takes no responsibility for the content of the page.


IMPORTANT NOTICE

You are leaving PenFed.org and entering a third party site. PenFed Realty, LLC is wholly owned by PenFed and this referral may provide PenFed a financial or other benefit.


For more information about the relationship between PenFed and PenFed Realty, LLC, see the Affiliate Business Arrangement Disclosure.


IMPORTANT NOTICE

You are leaving PenFed.org and entering a third party Website.


The content you are about to view is produced by a third party website that is unaffiliated to Pentagon Federal Credit Union. PenFed takes no responsibility for the content of the page.


IMPORTANT NOTICE

You are leaving PenFed.org and entering a third party site. PenFed Title, LLC is wholly owned by PenFed and this referral may provide PenFed a financial or other benefit.


For more information about the relationship between PenFed and PenFed Title, LLC, see the Affiliate Business Arrangement Disclosure.


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