How to Pay Less Interest on Your Mortgage

No one wants to pay more for something than necessary.  That includes interest on your mortgage.  There are some situations where you can reduce the overall amount of interest you pay during the term of your loan. 


Check your loan documents. There may be a provision that you can pay off all or a chunk of the debt early.  This means you can write a check for a lump sum to be applied to the principal or pay off the full amount early. 

Each contract is different, so be sure you understand the terms.  Sometimes the lender will allow an early or large payment but will put a cap on the amount, like a maximum of $10,000 per year.  That means the principal is reduced, and the amount of future interest calculated will reduce accordingly.  Just be careful, sometimes, there are penalties for early or pre-payments.  If you will save more in interest payments than the amount of the penalty, this is a good deal.

Annual Lump Sum

If your mortgage terms allow pre-payment, be sure that the money will be applied toward the principal. Not all contracts have that provision.  You could also send in an extra full mortgage payment, but you would still be required to make the full mortgage payment the next and subsequent months. It does not stand instead. If you are concerned about making monthly payments, you may need to choose another route.

Sometimes the terms allow for an annual lump sum payment at the anniversary date of the contract.  If so, that gives the borrower a once-a-year opportunity to pay up to 15% of the original loan amount that will be applied to the balance, with a minimum payment of $100.

Annual Payment Increase

Another option found in mortgages is that you can opt to increase your regular payment by 15%.  This increased amount would be applied toward the principal balance.  However, the usual terms are that this can only be used for a fixed-rate mortgage, not one with variable interest, and it is restricted to once per year at the anniversary date of the agreement.

Double Payments

As mentioned earlier, you may be able to make two regular payments on the same date.  Be sure the extra amount will apply to the principal.  Just remember that you will still be obligated for regular monthly payments.

Accelerated Payments

This is when you make a total of 13 payments during a calendar year instead of 12.  This happens when your monthly payment is divided into two installments in the same month.  So, you actually make an extra mortgage payment during the year, which does help reduce the principal quicker.

There are a number of details about these options to pay off your mortgage earlier.  The best source is for you to speak with an expert in the field. is one of the most reputable organizations in the country and can easily advise you about the benefits and disadvantages of your particular case.  It could very well be worth your time and effort to save money in the long run.