How to Pay Off a Mortgage in 5 Years

While homeownership is called “the American Dream,” owning a home also means taking out a mortgage for most people. And you don’t truly own your home until the mortgage is paid off, so many families want to pay their mortgage off quickly. If you really set your mind to it, you can shave years off your home loan. In this article, we’ll show you how to pay off a mortgage in five years. Consider working with a financial advisor as you consider paying off your mortgage quickly.

Mortgage rates are more volatile than they have been in a long time. Check out SmartAsset’s mortgage rates table to get a better idea of what the market looks like right now.

Should You Pay Off Your Mortgage in Five Years?

Paying off your mortgage provides peace of mind and true ownership of your home. It also eliminates one of the biggest monthly bills that most families have. By eliminating your mortgage quickly, you can refocus your money towards other goals, like early retirement, college education for the kids or a second home.

However, there’s more to it than that. While paying off your home in five years or fewer sounds like a good idea, it may not be the best strategy for you. Before starting down this path, take a look at your overall financial picture to ensure that your other goals and obligations aren’t being neglected.

You shouldn’t focus on accelerating your mortgage if you:

Owe credit card or other high-interest debt
Don’t have an emergency fund of three-to-six months of expenses
Have student loans outstanding
Aren’t maxing out your IRA and company retirement accounts
Haven’t saved for your child’s education
Don’t have adequate life and disability insurance

Early Mortgage Pay Off: Tax and Investment Trade-Offs

Paying off a mortgage in five years can free you from debt, but it also comes with trade-offs. Every dollar you put toward your loan is a dollar you cannot invest. If the after-tax return on investments exceeds your mortgage interest rate, you may be leaving long-term growth on the table. For example, paying extra on a 5% loan is a guaranteed 5% return, but if your investments could earn 7% after taxes, investing might provide a better outcome.

Mortgage interest also has tax implications. If you itemize deductions, the interest on your loan can reduce your taxable income. Paying the mortgage off early eliminates that deduction. While fewer taxpayers itemize under current law, it is still worth factoring in when deciding whether to accelerate payments.

Liquidity is another consideration. Extra payments toward a mortgage are locked into home equity. Unlike money in a 401(k), HSA, or brokerage account, tapping home equity later may require refinancing or selling the property. Keeping cash available in liquid accounts can offer more flexibility for emergencies or opportunities.

Retirement accounts also deserve attention. Contributing to a 401(k) or IRA may provide tax deferral or even employer matching, which can outweigh the interest savings from prepaying your loan. For example, a worker who gets a 5% employer match could earn far more by prioritizing the match before tackling their mortgage. HSAs offer similar advantages, with triple tax benefits that can help cover healthcare costs in retirement.

The best strategy may be a balance. You could pay enough toward your mortgage to reduce interest costs, while still directing funds to retirement accounts and investments that grow for the future. This blended approach preserves long-term growth potential, maintains liquidity, and still gets you closer to debt freedom.

In short, paying off a mortgage early delivers peace of mind and guaranteed savings, but it should be weighed against tax benefits, lost investment growth, and retirement savings opportunities. Looking at the full financial picture will help you decide whether to put every spare dollar into your home or to spread funds across multiple priorities.

Pay Off Mortgage vs. Invest Extra Cash

Deciding whether to use extra money to pay off your mortgage or invest it often comes down to comparing guaranteed savings against potential long-term growth. Paying down your mortgage early locks in a return equal to your loan’s interest rate. Investing, by contrast, carries more risk but offers the possibility of higher returns over time.

Let’s look at an example. Assume you have an extra $20,000 per year that you could either use to pay down your mortgage or invest for five years. Your mortgage rate is 5%, and your investments return 7% annually.

Strategy	5-Year Result
Pay off mortgage (5% rate)	Save about $10,513 in avoided interest (assuming payments are made at the end of each year)
Invest in market (7% return)	Build an account worth about $123,066

If the extra $20,000 is applied at the start of each year, the mortgage savings would rise to roughly $16,000, so both results can be accurate depending on timing.

Paying down your mortgage provides a guaranteed benefit and reduces long-term debt, which may appeal to those seeking financial security and fewer fixed expenses. Investing, on the other hand, has the potential for higher growth but depends on market performance.

In practice, many households do both—making small extra payments toward the mortgage while continuing to invest in retirement accounts. This approach reduces debt gradually without missing out on potential market gains.

How to Pay Off a Mortgage in Five Years

The following are some of the most common strategies homeowners use to pay off their mortgage in five years or less. Step One is simply figuring out how much extra to pay each month to hit your goal. There are many free online mortgage calculators that will help you calculate your new payment.

4 Ways to Come Up With the Money

Once you’ve got a specific dollar figure, you can lock down sources of the extra money required to climb this financial mountain. Not all of the following steps ensure success but in combination they may get you to the summit:

Cut back on spending and stick to a budget. In order to make the goal of paying off your mortgage in five years or less, most households need to cut back on spending and stick to a budget. With the goal of paying off the home loan in such a short timeframe, it is short-term pain for a long-term gain. And, you may actually decide that some of those previous purchases were more frivolous than they were necessary.
Boost your monthly income. Some homeowners may not have the necessary income to make paying off their home within five years a reality. However, they shouldn’t give up on their goal. Boosting your income with a side hustle, promotion or new job could make your dream a reality. There are numerous side hustles available and many employees are significantly increasing their income in the current job market. If you need to learn a new skill to qualify for a promotion or new job, many free online courses are available on the internet.
Establish a mortgage payoff fund. Instead of paying extra on your mortgage, you could invest the extra money in a brokerage account to create a mortgage payoff fund. This provides additional flexibility in case you change your mind or in the event of a job loss or other emergency. Additionally, you have the potential to earn a higher rate of return than your mortgage interest rate.
Apply “found” money. Even if you don’t have the monthly income to increase your monthly payment significantly, there are other opportunities to pay down your mortgage balance. Each time that you receive a tax refund, bonus from work, an inheritance or other unexpected money, apply that to your loan. These payment chunks will drop your balance quickly and reduce the overall interest that you’ll pay on the loan.

Specific Ways to Pay Off Your Mortgage

Once you’ve got the financial wherewithal to start you can chose from a number of practical ways to tackle the job. The following is a list of some of the ways that successful efforts have depended upon:

Refinance to lower your interest rate. Mortgage interest may be one of the major factors that is keeping you from reducing your loan balance faster. If you still have a high interest rate on your mortgage, consider a refinance to reduce the interest so more of your payment goes towards paying principal.
Recast your mortgage. A mortgage recast is when your lender recalculates your remaining monthly payments based on the outstanding balance and remaining term. Many borrowers ask their banks to recast their mortgage after they’ve made a large lump-sum payment to reduce their balance. Alternatively, some borrowers request a recast after they’ve made numerous small payments that add up to a large reduction in their balance ahead of schedule.
Make biweekly payments. Most homeowners make their mortgage payments on a monthly basis. However, some savvy borrowers pay half of their mortgage payment every two weeks to make an extra payment every year. This bi-weekly mortgage payment accelerates your loan payoff and reduces the overall interest that you’ll pay on your loan. Plus, paying every two weeks aligns with workers who receive their paycheck on a bi-weekly basis.
Purchase, or downsize to, a smaller home. Smaller homes often mean smaller mortgages. If you’re already a homeowner, think about selling and downsizing to a smaller residence. Not only can this reduce your mortgage payment, but you may enjoy the added bonus of smaller annual property taxes and insurance costs. On the other hand, if you have yet to buy a house and you know you only want to carry a mortgage for five years, make sure you have a large enough down payment to result in a mortgage you can pay off in five years.

Bottom Line

Paying off a mortgage in five years or less is achievable for some homeowners with careful planning. It may require reducing expenses or increasing income, depending on your situation. The process starts with understanding your loan details and creating a clear repayment plan. A financial advisor can help you review your options and develop a strategy that aligns with your overall financial goals.

Tips for Paying Off Your Home Early

A financial advisor can help you develop plans to accomplish all of your financial goals, including paying off your home quickly. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Your mortgage debt can play a significant role in the way you plan retirement. That’s why one of your most useful tools is a free mortgage calculator.
Once you’ve paid off your mortgage, your investments can grow very quickly. Without that monthly obligation, even more money can be invested to boost your portfolio. Our investment calculator can project how your money can grow based on time, contributions and rates of return.