The Mortgage 10/15 Rule: What It Is and How It Works (2024)

Buying a house is a big deal, and figuring out the best way to manage your mortgage can feel like navigating a maze. But what if there was a straightforward strategy that could help you pay off your 30-year mortgage in just 15 years? Enter the Mortgage 10/15 rule, a concept popularized by Sean Pan on TikTok (@seanlovesrealestate), that’s grabbing the attention of savvy homeowners and financial experts alike.

Read: 3 Things You Must Do When Your Savings Reach $50,000

Key Takeaways

• The 10/15 rule: A strategy to pay off your 30-year mortgage in about 15 years by paying an extra 10% of your mortgage payment every week towards the principal.
• Interest savings: By applying extra payments to your principal, you reduce the total interest paid over the life of the loan.
• Flexibility: While the original strategy suggests an extra 10% weekly, any additional amount can make a difference.

What Is the Mortgage 10/15 Rule?

The 10/15 rule is quite simple: if you can manage to pay an extra 10% of your monthly mortgage payment every week, you’re on track to turn your 30-year mortgage into a 15-year one. For instance, if your monthly mortgage payment is $3,000, you’d pay an additional $300 each week directly toward your loan’s principal.

Why does this work? Essentially, it lies in how mortgages are structured. Early on, a large portion of your mortgage payment goes towards paying off the interest charged by your lender. By paying extra towards the principal, you reduce the amount of interest you’ll pay over time since you’re decreasing the principal balance at a faster rate.

Who Benefits from This Strategy?

This approach is perfect for:

• Homeowners looking to save on interest: If you’re interested in cutting down the total interest you pay over the life of your mortgage, this strategy could save you a significant amount.
• Financially stable individuals: For those who have a bit of extra cash each month and are looking for smart ways to use it.
• Anyone aiming for financial freedom: If you dream of paying off your mortgage early and relieving yourself of that big monthly payment, this could be a path worth considering.

How It Works in Practice

Say you’ve got that $3,000 monthly mortgage. Following the 10/15 rule, you’d add an extra $300 each week to your payments, specifically targeting the loan’s principal. This extra payment strategy dramatically reduces your principal balance over time, which in turn decreases the amount of interest you owe. The result? You own your home outright in roughly half the time.

It’s worth noting, though, that while the idea of paying an extra $300 a week is a solid strategy, it might not be feasible for everyone. Budgets vary, and so do financial responsibilities. The good news is that any extra amount you can afford, whether it’s weekly, bi-weekly or monthly, will still make a difference. The key is to ensure these extra payments are applied directly to your loan’s principal and not just set aside for the next payment.

Will the 10/15 Rule Help Pay Down Your Mortgage?

While the 10/15 rule can be a game-changer, it’s important to adapt it to fit your financial situation. Here are a few tips:

• Communicate with your lender: Make sure they apply your extra payments to the principal.
• Start small: If an extra 10% weekly seems too much, begin with a smaller amount. Even an extra $50 or $100 a week can lead to substantial savings over time.
• Review your budget: Look for areas where you might be able to cut back and redirect that money towards your mortgage.

What About Mortgage Rates?

Talking about paying off your mortgage faster, it’s good to keep an eye on mortgage rates, too. These rates decide how much interest you’ll pay on your loan. The average mortgage price and loan rate can change, but knowing these can help you figure out when it’s a good time to borrow money or refinance your mortgage. Lower mortgage rates mean you’ll pay less over time, so if rates drop, it might be a good chance to look into refinancing to save even more.

Final Take

The Mortgage 10/15 rule offers a proactive approach to managing your mortgage, potentially saving you thousands in interest and accelerating your path to owning your home outright. Whether you’re able to follow the rule to the letter or adapt it to suit your budget, the principle remains the same: extra payments towards your principal can have a big impact. By making smart, informed decisions about your mortgage payments, you can enjoy the financial freedom and peace of mind that comes with paying off your home loan sooner rather than later.

Editor's note: This article was produced via automated technology and then fine-tuned and verified for accuracy by a member of GOBankingRates' editorial team.