Can you pay more on your mortgage?

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paying more on your mortgage

When finding the home of your dreams, paying off your mortgage may be on your top list of priorities. But is paying more than your fixed monthly payment beneficial? Putting an extra amount towards your mortgage payment may be a great financial decision for some but is not for everyone. Continue reading to find out if contributing an extra amount of money towards your mortgage is best for you.

Should I pay extra on my mortgage?

This answer is dependent on what your long-term plan is regarding your home. If you solely plan on staying in your home for the length of your loan, paying extra on your mortgage may be something you want to look into. 

This strategy will shorten your loan’s lifecycle, however, even though living in your home without a mortgage may sound ideal, there are several reasons why paying extra towards the principal may not be best for you. 

How does paying more on your mortgage help?

When you make extra mortgage payments, the additional cash goes towards the principal, not the monthly payments. Typically, mortgage loans’ monthly payments are fixed so this strategy does not work if you wish to lower your monthly amount. 

However, if you are looking to cut down on your loan’s life cycle, this may be a great financial option for you. Find out what other benefits paying extra on your mortgage can bring.

Save on interest

Usually, your loan’s interest rate is calculated and dependent on your remaining loan balance. When you pay extra on your monthly payment, that additional money is going towards the principal amount and therefore it reduces the amount of interest you pay over the life of the loan. Since these additional payments do not go towards your fixed monthly fee, let’s show a scenario of how this amount would reduce the loan’s interest. 

For example, say you have a 30-year fixed-rate loan for $100,000 that has a 3% interest rate. Your fixed monthly payment would be roughly $422, or $421.60 to be exact. The total amount of interest you would be paying is $51,777 throughout your loan. 

However, say you were dedicated to contributing an extra $200 per month towards your monthly payments. This additional amount would cut down your total paid interest to $28,079.

Shorter loan term

Shortening your mortgage’s life cycle may be your top priority. In this case, making these extra principal payments will help you achieve this goal. Using the example from above, by putting this extra money into the mortgage, you not only save on interest but also cut down the term of the loan. By putting $200 monthly towards this loan you can cut down on its lifecycle by more than 10 years which is a huge benefit. 

Extra cash

The more cash you put towards your mortgage now can help you in the long run. Since you would no longer have to save for monthly payments and interest towards your mortgage, you can use this money for other things. This can include putting it towards your retirement fund, general savings, a trip, or re-investing it. 

Are there disadvantages to paying off a mortgage?

Even though there are large upsides to paying off your mortgage early, there are some downsides as well. Before paying off your mortgage, take into consideration some of these factors. 

Repayment fees

Depending on the lender, some put in place a prepayment penalty if you pay all or part of your mortgage loan off early. These fees can range depending on how quickly you paid off the mortgage, however, typically they start around 2% of the outstanding balance. 

Some loans do have higher penalties, but many are set at a 2% maximum fee. To avoid this penalty, within the loan contract look for the terms regarding the loan’s repayment limit. By ensuring you will not pay over this limit, you will prevent yourself from having to pay a repayment fee.

Interest tax deduction

A home mortgage interest tax deduction allows homeowners to deduct their taxable income by the amount of interest paid on their loan. This is a great way for homeowners to reduce their tax bills while paying off their mortgage. The downside of paying off your mortgage early is that once your mortgage is paid off, you will lose that deduction which could put you in a higher tax bracket. 


When you pay off your entire mortgage, a large portion of your liquidity and net worth is tied to your home. However, homes are very illiquid. Meaning that if you needed a large amount of money quickly, you would have to look into alternative assets such as a savings account or stocks. Since a large portion of money contributes to paying off the mortgage, this could put you in a sticky situation if that amount is needed fast. 

3 simple ways to make an extra mortgage payment

A great way to see how paying more on your mortgage can impact you is to use a mortgage calculator. Additionally, there are various ways how one can pay extra on their mortgage payment. Read more here to find out which tactic aligns most with your needs. 

Monthly payments

Paying extra on monthly payments is the most popular way to execute this strategy. This is because monthly payments allow you to steadily chip away your loan and give you more leeway when it comes to your monthly budget. This also can be an easier transition for paying more on your standard fees. 

Bi-weekly payments

When breaking up your mortgage payments bi-weekly, it can make these fees feel more manageable. With bi-weekly payments, pay half of your mortgage monthly payment fee and slowly contribute your additional payment. This allows your increase in fees to feel less drastic since it could be a contribution of $50 bi-weekly, which can make a big difference in the long run.

Lump sum payment

If you have a significant amount of savings in cash, you can put some of these funds towards your mortgage. However, it is not recommended to do this strategy if you do not have an emergency fund set in place. Since homes are very illiquid, never tie up all your savings in your mortgage. 

How to pay off your mortgage faster

Paying extra on your mortgage can be a great way to reduce interest and the loan’s lifecycle. This is a great way to decrease your costs in the long run and allows you to allocate these funds to savings or other things in your life.


What is the best way to make an extra mortgage payment?

The best way to make an extra mortgage payment is to add an additional amount of money towards your bi-weekly or monthly payments.

Do extra payments automatically go toward principal?

When you make an extra payment, it may go towards the fees and interest added to the loan first. However, if you consistently make these additional payments, it will go towards the principal.

What happens if I make 1 extra mortgage payment a year?

It can reduce the term of your loan significantly depending on how much you additionally contribute.

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