A mortgage is a long-term commitment. What if we told you there are some simple ways to maximize your loan payments, minimize the time it takes to pay off your mortgage, and save a lot of money all at the same time? Here’s how to pay off your mortgage sooner.

Rounding up Monthly Payments

Let’s assume you have a $165,000 30-year mortgage at a 4.50% interest rate. Your current monthly payments, without taxes and insurance, are $836.03. Over the life of your loan, you will pay $300,971.07 for the mortgage.

Now, let’s pretend you increase your payment to $850, only an extra $13.97 per month:

  • You SAVE $5,357.80 over the life of the loan
  • Your home will be paid off 1 year earlier
  • $14 is likely just one day of bringing your lunch instead of eating out

Going a bit further, if you increase your payments to $900 per month, an extra $63.97:

  • You SAVE over $21,000 over the life of the loan!
  • Your home will be paid for 4 years earlier

You can see small changes mean BIG savings!

Splitting Payments in Half

Another possible way to pay your loan off sooner is to split your loan payments in half. Let’s stay with the same mortgage information and split your loan payments in two. Rather than paying $836.03, you would make a payment every two weeks of $418.02.

What happens:

  • You actually make one extra mortgage payment per year (52 weeks ÷ 2 = 26 payments)
  • You SAVE $24,000 over the life of the loan!
  • Your loan would be paid off 4 years earlier
  • Why does this work? Because you pay less interest in total ($112,013.28 with 26 bi-weekly payments VS. $135,971.07 with 12 monthly payments)

Works With All Loans

There is something to keep in mind. While we used an example of a first mortgage, this theory can be applied to any type of loan. You can save hundreds or thousands by applying a rounded amount to your monthly payment on auto loans, student loans and home equity loans.

A Few Words of Caution

Before making any additional payments, make sure your mortgage (or other loan) does not have a prepayment penalty in your loan agreement. This is important because you could lose money if you make extra payments and your mortgage lender assesses a penalty for prepayment.

When sending additional payments, you should indicate the overage is to be put against the principal balance of your loan. This is important since your lender will need to apply those payments correctly and your loan will be recalculated. In some cases, you may have to put in a request for the lender to run a new amortization schedule.

Borrowers who had a down payment of less than 20 percent and are paying mortgage insurance will benefit significantly from additional payments because it will help them increase the equity in their home. Once you’ve built up 20 percent equity, your lender will typically remove the monthly mortgage insurance. You can then enjoy lower monthly payments without the mortgage insurance or take that savings and further apply it to your monthly principal payments. This way, you’re saving even more money in the long run!

We’re Here to Help!

Small additional principal payments on your loan today could lead to big savings in the long-term! If you have questions on how to apply these tactics to your mortgage or other loans, call, chat, or text us M-F, 9am-4pm at (315) 671-4000.



Each individual’s financial situation is unique and readers are encouraged to contact the Credit Union when seeking financial advice on the products and services discussed. This article is for educational purposes only; the authors assume no legal responsibility for the completeness or accuracy of the contents.