Is Prepaying Your Mortgage A Good Decision?

Photo to accompany story about prepaying your mortgage.

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Brittany Anderson and her husband had a goal: pay off their mortgage before she turned 30. 

And they did it. By implementing a strict budget and generating extra income through side hustles, they paid off their 30-year home loan in under six years.

Their other trick? They paid their mortgage every two weeks, instead of every month. 

Afterward, Anderson posted about the value of making biweekly mortgage payments on TikTok — and the video has nearly 2 million views. There are a lot of people interested in learning how to pay off their mortgages faster.

Anderson says biweekly payments were an easy way to help pay off their debt faster.  When you divide your monthly mortgage in half and pay that amount every two weeks, you actually end up making a full extra payment every year. “But you don’t notice it as much,” Anderson says. 

This mortgage payment hack can be an excellent way to save money on interest and pay down your mortgage faster. Before you decide to do it, though, talk to your lender. “For us, it was something that our mortgage lender actually offered,” Anderson says. “It was super simple to set up, and we just clicked the biweekly button.” But not every lender does this.

Let’s look at how much you can save by making biweekly mortgage payments — and what you need to be aware of beforehand.

How Prepaying Your Mortgage Can Save You Money

Making biweekly mortgage payments is a way to prepay your mortgage.

With this strategy, you’ll divide your monthly mortgage payment by two and pay that amount every two weeks. By the end of the year, you’ll have made 26 payments — equivalent to a full extra monthly payment. Because the extra payment is spread out over a year, you won’t feel it as much, says Anderson.

The great thing about extra mortgage payments is that they’re typically applied directly to your principal balance, so doing this could save you thousands of dollars on interest. They’ll also help you pay off your loan faster.

For example, paying an extra month’s mortgage every year would save you over $24,000 over the course of a 30-year loan if you had a $350,000 mortgage with a 3% interest rate. You would also pay off your mortgage roughly 43 months, or three and half years, early. 

Even paying a small amount extra toward your mortgage each month can add up to big savings. The longer your loan term and the higher your interest rate, the more you’ll save by prepaying your mortgage. Here’s what you could save with additional small payments on various types of loans.

Loan TermStarting Loan BalanceInterest RateMonthly PaymentExtra Monthly PaymentExtra Paid AnnuallyTotal Interest SavingsMortgage Paid Off
30 Years$300,0003%$1,264$50$600$10,42021 Months Early
15 Years$300,0002.5%$2,000$50$600$1,8615 Months Early
30 Years$300,0003%$1,264$100$1,200$19,48340 Months Early
15 Years$300,0002.5%$2,000$100$1,200$3,60710 Months Early

You can calculate how much you’d save by making extra mortgage payments using NextAdvisor’s mortgage calculator. Just enter your loan information, click on “amortization schedule,” and you can add extra monthly payments, annual payments, or one-time payments.

The more you pay early, the better results. You could even pay off a 30-year home loan as if it were a 15-year loan. “If someone can afford to make a 15-year payment, but their loan is on a 30-year term, then by all means, I would say do that,” says Tammie Barrett, vice president and director of residential lending with Industrial Bank.

You’ll usually pay much less interest on a 15-year mortgage than a 30-year mortgage. But 15-year loans typically have much higher monthly payments, which makes them more difficult to qualify for. So you could end up in a scenario where you can afford the higher payments with a 15-year mortgage, but are only able to qualify for a longer-term loan. 

In this situation, you could follow Barrett’s advice and make payments on the 30-year loan as if it were a 15-year loan. Your mortgage would most likely have a higher interest rate than a comparable 15-year loan, but you could still save a massive amount of interest.

Loan TermStarting Loan BalanceInterest RateMonthly PaymentExtra Monthly PaymentExtra Paid Each YearTotal Loan Cost
30 Years $350,0003%$1,475$0$0$531,357
30 Years $350,0003%$1,475$858$10,296$439,234
15 Years $350,0002.5%$2,333$0$0$420,106

Why You Should Talk to Your Lender First 

Making biweekly payments is a great way to prepay your mortgage, which can reduce the interest you’ll pay over the life of the loan. 

Before you do though, it’s important to understand the difference between bimonthly and biweekly payments. With biweekly payments, you could pay off a 30-year loan four to five years early because you’re making an extra full payment each year. But bimonthly payments may cut only one or two months off a 30-year mortgage. This is because the interest savings from paying half of your monthly payment two weeks early is minimal.

And you should talk to your loan servicer before you make any extra payments. “The loan servicer needs to know that the borrower is making an additional payment and they wish to have that payment directly applied to the principal balance,” Barrett says.

Setting up everything correctly with your loan servicer will help you avoid headaches down the road, says Jennifer Beeston, mortgage-industry veteran and educator. “If you want to pay down your mortgage more, great, just make sure that your mortgage servicer is aware.” 

Forbearance is a real issue in the industry right now, Beeston says, and off-schedule payments could cause a red flag. “What I’m seeing on my end is people who are getting notifications on their statements  and their credit reports are being triggered as if they’re in forbearance, when they’re not,” she says. This can happen if your loan servicer unexpectedly receives a partial payment.

This is the exact problem Kathleen Wernli, 46, of Sacramento, California and her husband had when making an extra payment on their mortgage. In between two full monthly mortgage payments they made an additional payment for half of the normal monthly amount. The half payment caused their loan servicer’s system to automatically flag her account with an “adjusted forbearance suspense.”

Every loan servicer has a different process for handling extra mortgage payments or split payments. While some lenders accept partial payments, others might automatically put them in a suspense account (sometimes referred to as an unapplied funds account) until you provide the rest of the payment. If you aren’t aware of what’s going on and don’t communicate with your lender about why you’re making a half payment, it could consider the payment to be late, which could incur fees and impact your credit.

“I didn’t find out about the issue until we were in the process of purchasing a rental home and doing a refinance on our primary residence,” Wernli says. Wernli’s credit wasn’t impacted because her payments were up to date. But the flag on her account caused a significant delay in the mortgage underwriting process because it had to be cleared up before she could move forward with the new loans. 

Part of the issue for Wernli was she had made extra payments on a different mortgage and had no issues at all. “We did the same thing [extra partial payments] with another rental home and now we’re ahead a whole payment,” Wernli says. So you need to always ask how these payments will be handled and clear it with your lender.