Making Extra Monthly Mortgage Payments To Pay Off Loan Early


This ARTICLE On Making Extra Monthly Mortgage Payments To Pay Off Loan Early Was PUBLISHED On January 20th, 2020

Making Extra Monthly Mortgage Payments
Gustan Cho Associates

The benefits of Making Extra Monthly Mortgage Payments To Pay Off Loan Early:

  • Our loyal readers know we are experts in mortgage financing
  • We are able to help more clients than most lenders because we do not have additional LENDER OVERLAYS on our CONVENTIONAL, FHA, and VA mortgage loans
  • We also offer a full slate of NON-QM mortgages and USDA mortgage loans
  • We even have down payment assistance in renovation loans available
  • We can help you obtain a mortgage
  • We also want to give you some advice on how to pay your loan off faster

In this article, we will cover and discuss Making Extra Monthly Mortgage Payments To Pay Off Loan Early.

The Benefits Of Making Extra Payments To Pay Off Home Loan Before The Term Is Up

Recently I saw a hilarious post on Facebook from one of my friends who just bought his first house.

  • It said something along the lines of “Ready for numerous trips to Home Depot and 30 years of being poor.”
  • It is estimated, roughly 94% of first-time homebuyers utilize a 30-year mortgage product to purchase their home
  • Data shows the average American is in their home loan for between 5 1/2 and 6 years
  • Whether they sell the home or refinance, it is rare that you will be in your mortgage loan for the full 30 years

In this article, we will give you a few tips and tricks our clients have shared to pay their principal balance down faster than their mortgage term.

Bi-Weekly Versus Monthly Payments

Bi-weekly payments:

  • Bi-weekly mortgage payments are exactly what they sound like, a mortgage payment every other week
  • The concept of a bi-weekly mortgage payment is simple. It is a way to make an extra mortgage payment every year
  • You will make half a mortgage payment every other week, totaling 26 half payments or 13 full payments
  • The 13th payment will be applied directly to your principal balance
  • This extra payment can save you tens of thousands of dollars over the life of your loan
  • It adds up quickly
  • If your employers’ pay cycle is every other week, this is a great opportunity for you to start building equity in your property at a much faster pace
  • Since you are paying your loan off faster, you are effectively lowering your interest payments
  • Nobody has ever complained about paying less interest
  • Mortgage servicers sometimes have bi-weekly as a payment option, or you can set up directly through your personal bank
  • There are even third-party services who will help you set up bi-weekly payments

However, you typically paid them a couple of bucks to take care of this service for you.

Case Scenario Of Making Extra Monthly Mortgage Payments

What is the case with the scenario of making additional monthly mortgage payments

Here is a case scenario:


  • Let’s us a $250,000 home with a 5% down payment and an interest rate of 4.5%
  • The principal and interest payment will be $1,203 a month OR $602 bi-weekly
  • If you make your monthly payment up to $1,203 for the full 30 years, you will eventually pay $433,216
  • If you chose to make a biweekly payment of $602 (equivalent to $1308 a month), you will end up paying $398,731 over the life of your loan
  • That saves you $34,485. As you can see, this is a substantial amount of money

Making One Extra Monthly Mortgage Payment Each Year

Pay extra each month:

  • One more great tool for paying your loan off faster is simply adding extra payments to your minimum payment due
  • If you are able to afford more than your minimum mortgage payment, this is a great way to reduce your mortgage term
  • If you add 1/12 of your mortgage payment to each mortgage payment over the course of the year, you will effectively make one additional payment just like a bi-weekly payment method above

Paying more than that will simply lower your terms even further.

Applying Income Tax Return Refunds Towards Principal Paydown

Tax return to principal balance:

  • This time of year is a great opportunity to apply the extra money towards the principal balance of your mortgage
  • Many mortgage borrowers apply their tax return refunds to the principal balance of their mortgage
  • Doing this consistently every year can really save you over the long run

Random chucks applied to principal:

  • Some of our borrowers receive quarterly or annual bonuses from work
  • Assuming your financial situation allows, sending these bonuses directly towards the principal balance will also lower the term of your mortgage
  • Saving you on the interest of the mortgage loan balance

Making Extra Payments And Applying Towards Principal Balance

Which means making additional payments and complying with the main balance


  • I have heard horror stories in the past where borrowers send extra payments that get applied towards interest or sometimes even to their escrow account
  • There is a certain box you must select to apply your extra funds towards the principal balance
  • This box is very important but also easy to locate
  • If you make your payments online, there’s a special section for extra principal payments
  • If you make your payment with a check, your mortgage statement will have a box for additional principal funds

Make sure you contact your servicer to verify your funds are being applied towards the principal balance of your mortgage.

Tips And Tricks When Making Extra Mortgage Payments

These tips and tricks can save you thousands of dollars over the life of your mortgage. Sometimes this is more effective than a rate and term refinance. Depending on your current loan situation, the presence of mortgage insurance, and additional payments you can afford, it may not make sense for you to complete a rate and term refinance. For a refinance quote, please give us a call today. Please call Mike Gracz at 630-659-7644 or send an email to

Gustan Cho Associates are experts in mortgage financing. Please give us a phone call with any questions regarding paying your mortgage off faster. We are here to help seven days a week. Subscribe to our YouTube CHANNEL to stay up to date on all mortgage news!

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