Should you pay off your mortgage early? 1 in 4 homeowners make extra payments — here’s when it makes sense
About 1 in 4 mortgage borrowers are making extra payments on their home loans, according to a recent analysis from Rocket Mortgage. The Rocket Mortgage analysis looked at payments made by its customers over the past five years. It found that at least 25% of borrowers made extra payments toward their mortgage principal during that period.
The trend was strongest in 2021 and 2022, when mortgage rates were historically low. Extra payments have become less common in the years since. Paying even a small amount extra every month can help homeowners finish their mortgage sooner. For example, adding $50 or $100 to a monthly mortgage payment can slowly reduce the amount of time left on the loan, as noted by USA Today.
Mortgages often have lower interest rates than other types of debt, such as credit cards, personal loans and some home equity loans. Kate Wood, a lending expert at NerdWallet, said that while a mortgage may be a person’s biggest debt in terms of dollars, it is often their debt with the lowest interest rate, according to USA Today. This means homeowners should look at their entire debt situation before deciding to put extra money into their mortgage.
Who benefits most from paying extra?
On paper, making extra mortgage payments should make the most sense for people with higher mortgage interest rates, because they can save more interest by reducing their principal. However, Rocket Mortgage found something different in its customer data: extra payments were more common among borrowers with lower mortgage rates.
Why paying off a low-rate mortgage may not always make sense
Financial advisers may caution homeowners against aggressively paying down a low-interest mortgage, particularly when they have other debts with higher interest rates. For example, someone with a mortgage below 4% but a credit card charging a much higher rate may be better off paying down the credit card first.
About one-fifth of mortgage holders have interest rates below 3%, according to Bankrate. These very low mortgage rates are one reason some homeowners may choose to keep their existing loans rather than rush to pay them off.
Kara Ng, a senior economist on Zillow’s Economic Research team, said the financial benefit of extra payments can be much greater for someone with a mortgage rate above 6%, according to USA Today. Ng said the situation is very different for a homeowner with a mortgage rate below 4% compared with someone paying 7% or more.
3 ways to pay off a mortgage early
1. Make extra principal payments
The simplest way to pay off a mortgage faster is to make extra payments toward the principal. Homeowners do not necessarily need to make a huge additional payment. They can add a fixed amount such as $50 a month or simply round their regular payment up to the next $100. Someone with more cash available could also make a large one-time lump-sum payment toward the mortgage principal.
Mortgage websites often allow borrowers to make an extra-principal payment directly. Homeowners should look for an option marked “extra principal” when making a payment. An amortization calculator can also show how increasing monthly payments could change the mortgage payoff date and total interest costs.
Nadia Evangelou, principal economist at the National Association of Realtorsgave a larger example of how extra payments can change a mortgage. Consider a $400,000, 30-year mortgage with a 3.5% interest rate. The monthly principal and interest payment on that loan would be about $1,800.
If the homeowner adds $500 every month, the mortgage could be paid off in roughly 20 years instead of 30 years. That would mean paying off the loan about 10 years earlier. The homeowner could also save about $87,000 in interest over the life of the loan, according to Evangelou’s example.
2. Get a mortgage recast
A second option is a mortgage recast. In a recast, the homeowner makes a large one-time payment toward the mortgage principal. The lender then recalculates the remaining loan based on the lower balance. This results in a lower monthly mortgage payment. The main purpose of a recast is therefore to reduce the monthly payment, rather than necessarily paying off the mortgage earlier.
A recast generally does not shorten the original mortgage term. Not every mortgage lender offers this option. A homeowner usually needs to make a large principal payment to qualify for a recast. The lender may also charge a fee for the transaction. A recast can reduce the amount of interest paid because the loan balance becomes smaller. However, mortgage experts say a homeowner generally saves more interest by putting the same lump sum directly toward the existing mortgage without recasting.
Also read: Mortgage rates near 6.7%: Why homeowners are refusing to give up cheap 3% loans
3. Refinance the mortgage
A third option is to refinance the mortgage. Homeowners refinance for different reasons, including trying to get a lower interest rate. Many homeowners were able to lock in mortgage rates of 3% or lower during that period, according to Freddie Mac.
Refinancing is much less attractive for many homeowners in September 2026 because current mortgage rates are significantly higher. The national average rate for a 30-year fixed mortgage is about 6.75%, according to Bankrate.
Ng of Zillow said refinancing may make financial sense for someone looking to save money if they can reduce their mortgage rate by about one percentage point or more. With rates much higher now, finding a refinance that saves enough money is more difficult.
Refinancing also comes with costs. A mortgage origination fee generally ranges from 0.5% to 1% of the loan amount. Those upfront costs need to be included when calculating whether refinancing will actually save money. If the main goal is simply to pay off the mortgage faster, Banfield of Rocket Mortgage said refinancing may not be necessary. Instead, homeowners can keep their existing mortgage and increase their monthly payments, putting the extra money toward principal.
So, should you pay off your mortgage early?
The answer depends largely on the interest rate on your mortgage, your other debts, your savings and your financial goals. If you have a high-rate mortgage, especially one above 6%, making extra principal payments can provide meaningful interest savings. If you have a very low-rate mortgage, such as one below 3% or 4%, rushing to pay it off may be less attractive financially.
In that situation, it can make sense to first deal with higher-interest debt and make sure you have enough emergency savings. Homeowners also need to consider whether they would rather use extra cash to invest, save for retirement or reduce their mortgage balance.
The key is to compare the interest you would save by paying down the mortgage with what you could potentially gain by using that money elsewhere. Ultimately, homeowners should look at their own numbers before deciding whether paying off a mortgage early is the smartest move.
