Save Dollars on Your Mortgage
Small extra payments toward principal can save you tens of thousands in interest and knock years off your loan. See exactly how much you could save.
By Loretta Kilday • Reviewed by the DebtCC Editorial Team
Debt Relief Specialist & Spokesperson
Mortgage Savings Calculator
Slide parameters to estimate your amortization savings.
KEY TAKEAWAYS
- Extra mortgage payments go entirely toward principal reduction.
- Accelerating principal cuts total interest accrual over loan lifespans.
- Compounding calculations multiply daily interest savings exponentially.
- Prepayment terms require verification to bypass lender penalties.
Small extra payments toward principal can save you tens of thousands in interest and knock years off your loan. See exactly how much you could save.
Why Extra Payments Work
Reduces Principal
Extra payments go directly to principal, not interest. Less principal means less interest charged each month.
Shortens Timeline
Paying faster means fewer months of interest accrual. A 30-year loan can become a 20-year loan with consistent extra payments.
Compounds Over Time
Each extra payment saves interest on every subsequent payment. The effect multiplies year after year.
Build Equity Faster
More of each payment goes to ownership. You own your home faster and have more equity if you need to refinance or sell.
Proven Strategies to Save Dollars
Bi-weekly payments
Instead of monthly, pay half your mortgage every two weeks. This results in 26 half-payments yearly (13 full payments vs. 12).
Annual lump sum
Put tax refunds, bonuses, or inheritance into your mortgage as a single large payment toward principal.
Round-up payments
Round your payment to the nearest $100 or $500. Small increases compound into major savings.
Refinance strategically
If rates drop, refinance to a shorter term while keeping payments similar. You'll pay less overall interest.
Important Considerations
Check for Prepayment Penalties
Some mortgages penalize early payoff. Review your loan documents or contact your lender before making large extra payments.
Prioritize High-Interest Debt First
Credit cards and personal loans often have higher rates than mortgages. Tackle those first for maximum savings impact.
Frequently Asked Questions
How does paying extra help save money?
Extra payments go directly to principal, reducing the amount of interest charged each month. The less principal you owe, the less interest accrues.
What if I can't afford extra payments every month?
Even occasional extra payments help. Consistency matters more than amount. Even $25-50 monthly makes a difference over time.
Should I pay extra or use the money for other debt?
Prioritize high-interest debt first. Credit cards and personal loans often have higher rates than mortgages, so tackle those first.
Can I pay the extra amount anytime?
Yes. Many lenders allow extra principal payments anytime. Check your mortgage agreement for any prepayment penalties.
What if my mortgage is adjustable rate?
Extra payments still help reduce principal, but you face rate adjustment risk. Consider refinancing to fixed if rates are favorable.
Loretta Kilday
Debt Relief Specialist & Spokesperson, DebtCC
Loretta Kilday, Esq., is an accomplished litigator and transactional attorney with more than 30 years of experience across debt collection, bankruptcy, and related matters. DebtConsolidationCare features her as its spokesperson and public voice. She has also trained and mentored junior attorneys and associates. She earned her J.D. from DePaul University College of Law and a B.S. in Finance from DePaul University.
- Loretta Kilday
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