Paying Extra Mortgage Payments: Should You Do It? | Chase (2024)

FAQs

Is it worth making extra mortgage payments? ›

Making extra mortgage payments can help reduce interest as well as the term of your loan.

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.

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.

Regardless of the amount of funds applied towards the principal, paying extra installments towards your loan makes an enormous difference in the amount of interest paid over the life of the loan. Additionally, the term of the mortgage can be drastically reduced by making extra payments or a lump sum.

You have high-interest debt.

Rather than make extra payments toward your mortgage principal, consider paying down high-interest debt first. This can include credit card, student loan, medical, and car loan debt, just to name a few.

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.

As Ramsey pointed out, paying more than the minimum amount due each month can cut down on the total amount of interest paid. This is because more of your hard-earned money is going toward the principal balance rather than the interest. Paying early and often also can lower the overall loan term.

The additional amount will reduce the principal on your mortgage, as well as the total amount of interest you will pay, and the number of payments.

Making extra payments of $500/month could save you $60,798 in interest over the life of the loan. You could own your house 13 years sooner than under your current payment.

Making an extra mortgage payment each year could reduce the term of your loan significantly. The most budget-friendly way to do this is to pay 1/12 extra each month. For example, by paying $975 each month on a $900 mortgage payment, you'll have paid the equivalent of an extra payment by the end of the year.

How much should my mortgage be if I make $100000 a year? ›

This commonly used guideline states that you should spend no more than 28 percent of your income on your housing expenses, and no more than 36 percent on your total debt payments. If you're earning $100,000 per year, your average monthly (gross) income is $8,333. So, your mortgage payment should be $2,333 or less.

Make Biweekly Payments

This strategy can shave four to six years off a typical 30-year loan, depending on your interest rate. On a 15-year mortgage, biweekly payments may cut one to three years from the repayment time, depending on the loan amount and interest rate.

By overpaying on your mortgage, you could reduce your debt and save money that way. You'd be making gains at the same rate as your mortgage. So, if your mortgage rate is 6% (after the base rate rises), for example, that's the equivalent of savings that would earn 6% in interest.

Should I overpay my mortgage when inflation is high? Generally speaking, overpaying your mortgage is always a good idea.

But if you have a relatively recent loan, you're likely looking at tens of thousands of dollars in savings and cutting as much as eight years off the life of your loan. Obviously, not everyone can afford to make two extra mortgage payments a year. You're basically increasing your housing costs by 16%.

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.

Making extra payments of $500/month could save you $60,798 in interest over the life of the loan. You could own your house 13 years sooner than under your current payment. These calculations are tools for learning more about the mortgage process and are for educational/estimation purposes only.

By paying extra on your loan, you pay down the principal amount faster. This means you'll potentially pay less in interest over the life of your loan and may even shorten your loan term.

No matter how much extra you pay each month, that amount can help shorten the life of your loan. Even making one extra mortgage payment each year on a 30-year mortgage could shorten the life of your loan by four to five years.