What do I do when a loan is paid off?

List every other debt. When one is paid off (a car, a student loan, a card), keep paying the same amount, now to mortgage principal. Hypothetical, not guaranteed. This is educational information, not advice.

Strategy 6 of 107

Debt rollover: redirect every payment that ends

Most predictableFrom new cash flow, not your paycheck

What it is

List every other debt. When one is paid off (a car, a student loan, a card), keep paying the same amount, now to mortgage principal.

Steps

List every other debt. When one is paid off (a car, a student loan, a card), keep paying the same amount, now to mortgage principal.
For card balances you already have, one balance transfer to a lower rate can finish them sooner. Do not open new lines to do it.
Each finished debt adds its payment to the next, ending with the mortgage.

Repeat: Each time a debt ends.

Measure: The total of freed payments now going to principal.

Try it in the calculator Enter its amount in "Monthly non-income amount to principal". Add a payoff goal of 5 years to see what is still needed.

Risks

Balance-transfer fees, and a rate that jumps after the promotion.
New spending on the cleared card undoes it.

Who it fits

Average household, Higher earners, Higher net worth, with assets, Business owners, Newlyweds, Married couples, College students, Single, Grandmas and grandpas (62 and over), No high school diploma, No college degree

Needs

Any homeowner with a mortgage.

How predictable

Most predictable: once in place, the payoff date is arithmetic

A worked example (hypothetical, not guaranteed)

Picture a hypothetical household (average household). They owe $300,000 at 6.5% with 30 years left. The required payment is $1,896 a month, and that payment, which comes from income, never changes in this example.

They follow the steps: list every other debt. When one is paid off (a car, a student loan, a card), keep paying the same amount, now to mortgage principal.

Suppose it brings $600 a month on principal from this strategy, not from the paycheck. The loan would be paid off in 16 years 3 months instead of 30 years, saving about $196,219 in interest. To finish in five years, they would still need about $3,374 a month more from other strategies. That is why the five-year sequences stack several at once.

The amount above is chosen only to show the arithmetic. It is not an estimate of what this strategy will produce for anyone. Put real numbers from the fact finder into the calculator.

Sequences that use it

Starter cycle: withholding, rollover, room rent: No new debt. Each step adds a monthly amount to principal; together they stack.
Live-in landlord ladder: Buy owner-occupied, rent the other units, move after the occupancy period, repeat. Each property's rent pays its own principal.
Two-income couple cycle: Reset both W-4s, roll each ended debt into principal, refinance when rates drop, recast after windfalls.
Most predictable stack (no markets, no tenants): Every step is fixed arithmetic once it is in place. This is the closest thing to a sure payoff date: still not guaranteed, because income, rates offered and family gifts can change.
Cost-cutter stack (no new debt): Every dollar comes from a bill that got smaller. The total you pay each month stays the same, and the difference lands on principal.
Bills-first stack (lowest income): No new loans and nothing to buy. Free weatherization, money already owed to you, and payments that end.
Five-year sprint: move out and rent it: The whole rent goes to principal for up to three years, idle savings go in, and each recast lowers the required payment. Move back in time to keep the home-sale exclusion.
Student loans gone, then the house: Every student loan payment that ends becomes a principal payment the next month.

Sources and more information

CFPB: Consolidating credit card debt consumerfinance.gov
CFPB: Credit card key terms (balance transfer fees) consumerfinance.gov

Where to get help

CFPB: Find a HUD-approved housing counselor (free or low cost) consumerfinance.gov