Mortgage 101

Should You Make an Extra Mortgage Payment?

By Lauren Caggiano on March, 2 2021
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Lauren Caggiano

Lauren Caggiano is a Fort Wayne-based copywriter and editor with a nerdy passion for AP Style. In her free time, she enjoys volunteering, thrift shopping, fitness and travel. Learn more on her website:

Maybe you've owned your home for several months or several years. Either way, you might be curious about how you might fast-track paying off your mortgage. One way to do that is by making extra payments towards the principal. But is it a good idea for you and your situation? The short answer: It depends.

Let’s look at a few of the possible scenarios to help you determine if it makes sense to expedite your payoff. For instance, paying an extra $200/month on your mortgage to knock it down from 30 years to 25 years in a house you may only inhabit for 5 years does not help you in the end. Instead, you may just be pressed for funds and never fully capitalize on the extra effort.

That’s because making extra payments on your mortgage does not lower your monthly payment. Applying additional payments to the principal just helps to shorten the length of the obligation. You will save money in the long run, because you’d effectively shorten the loan term and stop making payments sooner than if you had just kept on the current course. However, that only happens after a certain (and considerably long) period of time.

The Benefits

Still, there are merits to this approach. Here are a few: 

Save on Interest: Interest is calculated based on your remaining loan balance. So that means making multiple principal payments every month will significantly reduce your interest payments over time. It’s not magic but math. By paying more principal each month, you gradually lower the principal balance and interest charged on it.

Shorten the Loan Term: Another perk to throwing more money at your mortgage balance each month is that you’ll shorten the length of your mortgage term and save you some money. Plus, this will allow you to build equity faster.

Implement It

Now that you understand the basic math behind this strategy, putting it into practice is the next step. Making additional payments doesn’t have to be a regular commitment. On the contrary, you’ll still see results by leaving up your payment frequency. It could be one extra mortgage payment a year or an extra payment every few months. Regardless of the specifics, you’ll be on the right track to financial freedom. Maintain a consistent schedule of these additional payments over an extended period of time and you'll likely shave off several years from your term.

Another go-to tactic that holds promise for the same reason is to make a lump sum. Maybe you received a large tax refund or a bonus at work. By applying an extra (unexpected) chunk of change towards your principal, you can make some headway.

The same goes for rounding up. Say your monthly payment is usually $750/month. By paying $800/month instead, you can be on the path to paying off your loan faster.

One last word of advice: Before you commit to making extra principal payments on your mortgage, it’s best to take into account your budget and overall financial goals. As mentioned above, consider how long you plan on living in the property. Also, account for any significant upcoming expenses, such as college tuition, a vacation, new car, home renovations, wedding, etc. and outstanding debts that might require prioritizing.