Dave Ramsey's Baby Step 6 - Pay Off Your Mortgage Early (2024)

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What does Dave Ramsey say about paying off a mortgage early? ›

If you currently have a 30-year loan, Ramsey suggested refinancing it for a shorter term. This can get you out of debt faster. However, if your current mortgage has a very low interest rate, you might want to stick with what you have and simply make larger monthly payments to pay off your mortgage early.

Baby Step 6: Pay Off Your Home Early

Your mortgage is the only thing between you and complete freedom from debt. Can you imagine your life with no house payment? Learn how extra money put towards your mortgage can save you tens (or even hundreds) of thousands of dollars in interest with our Mortgage Payoff Calculator.

You might want to pay off your mortgage early if …

You want to save on interest payments: Depending on a home loan's size, interest rate, and term, the interest can cost hundreds of thousands of dollars over the long haul. Paying off your mortgage early frees up that future money for other uses.

Orman said she doesn't recommend this strategy if you're 35 and know you're going to move in three or four years. But she does believe that if you are older and your goal is to gain financial security and safety, paying off your mortgage as quickly as possible is a wise idea.

Paying a little extra towards your mortgage can go a long way. Making your normal monthly payments will pay down, or amortize, your loan. However, if it fits within your budget, paying extra toward your principal can be a great way to lessen the time it takes to repay your loans and the amount of interest you'll pay.

When you pay an extra $100 on your monthly mortgage payment, that entire amount goes to principal. You'll reduce your total balance much more quickly when you make an extra payment that goes directly to repaying your balance. You could cut around four years off your repayment time with just an extra $100 per month.

Increasing your monthly payments, making bi-weekly payments, and making extra principal payments can help accelerate mortgage payoff. Cutting expenses, increasing income, and using windfalls to make lump sum payments can help pay off the mortgage faster.

For three to five years, they live differently from everyone else—sacrificing to pay off their mortgage. Then they continue to live differently from everyone else by being debt-free. Most people who start a Total Money Makeover pay off their mortgage and complete baby step 6 about seven years later.

What are the baby steps according to Dave Ramsey? ›

You've got to build that buffer between you and Murphy, or you'll fall right back into debt. Then you can start doing Baby Steps 4, 5 and 6 at the same time, but even those are done in order of priority. Start with saving 15% of your income for retirement.

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.”

Throwing in an extra $500 or $1,000 every month won't necessarily help you pay off your mortgage more quickly. Unless you specify that the additional money you're paying is meant to be applied to your principal balance, the lender may use it to pay down interest for the next scheduled payment.

Options to pay off your mortgage faster include:

Pay extra each month. Bi-weekly payments instead of monthly payments. Making one additional monthly payment each year. Refinance with a shorter-term mortgage.

Not only is there huge freedom in being completely debt-free and living in a paid-for house, but it's also a great way to build wealth—getting rid of your house payment leaves you with a ton of extra money each month to save for retirement.

Increasing your monthly payments, making bi-weekly payments, and making extra principal payments can help accelerate mortgage payoff. Cutting expenses, increasing income, and using windfalls to make lump sum payments can help pay off the mortgage faster.

The same is true when it comes to paying down your mortgage. To O'Leary, debt is the enemy of any financial plan — even the so-called “good debt” of a mortgage. According to him, your best chance for long-term financial success lies in getting out from under your mortgage by age 45.