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Dave Ramsey’s 7 Tips for Paying Off a

Mortgage Faster

Barri Segal
Wed, March 8, 2023, 7:30 AM PST · 5 min read

Forbes.com

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The amount you have to finance through a mortgage

loan and the long-term commitment you’re making
to real estate can be overwhelming. Completing a
mortgage payoff early could save you a bundle of
money, not to mention years of not having a big
payment hanging over your head each month,
according to Dave Ramsey, financial guru, author and
host of “The Dave Ramsey Show.”

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Here are Ramsey’s tips for how to pay off your

mortgage early.

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1. Make an Extra House Payment Each

Quarter

When you throw extra money at your monthly

mortgage payment, more of each payment after that
goes toward your principal balance. Plus, with each
extra payment, you’ll be closer to removing private
mortgage insurance faster from your loan if you have
it. Once your mortgage’s principal balance is 80% of
the original value of your home, you can request
removal of your PMI.

Here’s how extra payments would affect a $220,000,

30-year mortgage with a 4% interest rate:

Make one extra payment each quarter to shave 11

years and nearly $65,000 off your mortgage.

Divide your payment by 12 and add that amount

to each monthly payment, or pay half of your
payment every two weeks. This bi-weekly
payment schedule adds up to one extra payment
each year, saving you $24,000 and four years off
your mortgage.

When you can’t afford that extra payment, just

round up your payments so you’re paying at least
a few extra dollars each month, and increase your
payment when you get a raise or bonus. That little
bit extra will save you from paying more interest
than you have to.

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2. Bring Your Lunch to Work

Bringing a brown-bag lunch to work every day isn’t

exactly glamorous, but it will save you money you
can put toward paying down your mortgage — to the
tune of $1,200 a year — and, using the same example
mortgage as before, enable you to pay it off three
years early, according to Ramsey. You’ll also save
more than $28,000 in interest.

Another way you can put more money toward your

mortgage, according to Ramsey, is to remove your
daily coffee shop stop — which can really add up. Add
that $90 per month you spend on Starbucks to your
mortgage payments, and you’ll save $25,000 in
interest and reduce your loan by four years.

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3. Refinance — or Pretend You Did

Low-interest rates might make it tempting to stretch

out your payments over the course of the entire
loan. The Dave Ramsey mortgage plan encourages
homeowners to aggressively pay off their mortgages
early, however.

One recommendation Ramsey makes is to convert

your 30-year mortgage into a fixed-rate, 15-year
home loan. Not only will you pay off a 15-year
mortgage in half the time, but you’ll also pay much
less in interest.

Once you get into that 15-year-mortgage, increase

your payments, if possible, to pay it off in, say, 10
years. Or, if refinancing your 30-year mortgage isn’t
feasible, pay toward your mortgage like it’s a 15-year
mortgage. Either way, you’ll have more money each
month even sooner to invest for retirement, save for
college or put toward some other goal.

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4. Downsize Your Home

Consider selling your home before paying it off — if

you have enough equity in it — and using your profits
to buy a smaller, less expensive one. You might be
able to pay cash for a new house, and even if you do
need to get a mortgage, it will likely be small — and a
smaller balance means you can pay it off sooner. In
any event, you’ll have successfully reduced your debt.

Ramsey doesn’t recommend that house hunters seek

VA loans, which are backed by the Department of
Veterans Affairs. They’re usually more expensive than
conventional loans, according to Ramsey. The only
advantage of the VA house loan is that you don’t
need a down payment, which Ramsey considers a
trap.

5. Don’t Bite Off More Than You Can

Chew

Being financially ready to take on the cost of

homeownership is paramount. Ramsey recommends
that you be able to answer all of these six questions
with a “yes” before committing to a mortgage —
otherwise, you should wait to purchase a home:

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1. Am I free of debt with three to six months of living

expenses saved?

2. Can I make a 10% to 20% down payment?

3. Will I be able to pay the closing costs and moving

expenses with cash?

4. Is the house payment no more than 25% of my net

salary?

5. Can I afford to choose a 15-year, fixed-rate

mortgage?

6. Can I afford to pay the utility and maintenance

costs as long as I own the home?

6. Consult a Pro to Find the Right Home

Finding a home on your own takes time and energy.

Instead, you choose to rely on the expertise of real
estate professionals who can help you find the
perfect home and negotiate the price on your
behalf, so you can be confident you’re getting the
best deal possible.

Ramsey’s nationwide Endorsed Local Provider

network can help you find a local real estate
professional you can trust. The ELPs in the network
promise to help you save time and money, so you
won’t have to worry about being pressured into
buying a home that doesn’t fit your budget.

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7. Maximize Your Down Payment

Although Ramsey is an advocate of buying a home

with 100% down, not everyone can wait to gather the
total amount they need before purchasing a home.
The key is to put down a minimum of 10% or as much
as you can to reduce the amount you’ll need to
finance.

Put down 20% and save even more money. When you
take out a conventional loan and opt for a down
payment of at least 20%, you can avoid having to pay
PMI. PMI usually costs between 0.5% and 1% of the
mortgage loan amount each year — which equals
money you could be adding to your mortgage
payment.

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Cynthia Measom contributed to the reporting for this

article.

This article originally appeared on

GOBankingRates.com: Dave Ramsey’s 7 Tips for
Paying Off a Mortgage Faster

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