Should You Make Extra Mortgage Payments? What to Know

How to Pay Off Your Residential Loan Faster (Without Wrecking Your Budget)

If you’re looking for ways to save money on your mortgage, paying extra toward your residential loan might sound like a smart move. And in many cases, it is. But before you jump in, it’s important to understand how it works, and whether it makes sense for your overall financial plan.

As a Colorado loan officer, I’ve seen small changes make a big difference for homeowners. Let’s walk through what you need to know.

Why Extra Payments Help

Each month, your mortgage payment goes toward two things:

• Principal (the amount you borrowed)

• Interest (what you pay to borrow that money)

In the early years of your loan, most of your payment goes to interest. When you make extra payments and apply them to principal only, you lower your balance faster. That means less interest builds up over time, and you could pay off your home years earlier.

Try One Extra Payment a Year

One of the easiest strategies is to make one full extra mortgage payment each year. You can do this by:

• Using a tax refund or bonus to make a lump-sum payment

• Adding a little extra to each monthly payment (just divide one full payment by 12)

This simple step can save you thousands of dollars in interest and shorten a 30-year loan by several years.

What About Biweekly Payments?

Another method is to switch to biweekly payments. That means you pay half your monthly mortgage amount every two weeks. Since there are 52 weeks in a year, you’ll make 26 half-payments- or 13 full payments a year instead of 12.

That one “extra” payment per year can really add up over time. Just make sure to check with your lender first. Some offer official biweekly programs, while others may require you to manage it on your own.

A Few Things to Check First

Before making any extra payments:

• Look for prepayment penalties. Most modern mortgages don’t have them, but it’s worth double-checking.

• Mark it clearly. When submitting your extra payment, be sure to label it “principal only.” Otherwise, it could be applied to your next payment instead, which doesn’t help you pay off your loan faster.

• Check your financial picture. Sometimes it’s better to build an emergency fund, pay down high-interest debt, or boost your retirement savings first. Extra mortgage payments work best when they’re part of a bigger plan.

Final Thought

Paying off your mortgage early can be a great goal—but it’s not the right move for everyone. If you’re not sure where to start, a quick chat with a Colorado loan officer can help you decide what’s best for your budget and long-term goals.