Is It Worth Making Higher Monthly Mortgage Payments to Be Debt Free Faster?

by Maurie Backman | Updated July 19, 2021 - First published on April 11, 2021

Many or all of the products here are from our partners that pay us a commission. It’s how we make money. But our editorial integrity ensures our experts’ opinions aren’t influenced by compensation. Terms may apply to offers listed on this page.
A woman standing next to her kitchen sink while sipping out of a coffee mug.

Image source: Getty Images

Paying off your mortgage early comes at a cost.

When you take out a mortgage to buy a home, it usually takes decades to repay your loan. In fact, the 30-year mortgage loan is especially popular even though it has a long payoff time.

You do have the option to pay off your loan in less time, though. You could choose a shorter payoff term, such as a 20-year or a 15-year loan. These tend to come with reduced interest rates along with the shorter payoff time. Or you could opt for a 30-year mortgage and just pay extra each month in order to pay it off faster.

With either approach, there's a tradeoff that you're going to need to make. You will have to make higher monthly payments if you want to get your debt paid down sooner. On the other hand, the longer you take to repay your loan, the less you'll pay each month. But that means your loan will cost more over time.

So, the big question to ask yourself is whether it's worth paying more every month to become debt-free sooner.

The advantages of higher monthly mortgage payments

Becoming free of your mortgage debt sooner has several benefits, including:

  • Saved interest costs: When you pay interest for less time, that's more money for you instead of the mortgage lender.
  • More financial flexibility: When you don't have a mortgage payment to make, you can do what you like with your money. Once you no longer have this major monthly obligation, you have more options in life like working less or switching to a lower paying job.
  • Peace of mind: You'll know that you own your home free and clear and don't have to worry about the bank foreclosing.

The downside to paying more each month

Unfortunately, the benefits of paying off your debt sooner come at a big cost. Namely, when you make those extra monthly payments to repay your debt, you won't be able to do other things with that money. And that has consequences. For example:

  • You're tying up funds: It's not easy to access the extra money you paid on your house if you end up needing it. You would have to take a cash-out refinance, home equity loan, or home equity line of credit to get that money back.
  • You're missing out on other opportunities: Mortgage interest rates are still really low. Since your return on investment (ROI) when paying off your mortgage is simply the interest you save, that means you're getting a low rate of return. Chances are good you could get a much better ROI by investing in the stock market. You could also miss out on tax breaks for investing if you aren't maxing out your 401(k) and IRA because you're paying higher monthly mortgage payments.

Since there are advantages and disadvantages to both options, you'll need to carefully consider which approach is best. If you're disciplined enough to invest your money, you could end up in a financially better position by keeping your mortgage payments low and investing the extra you would have paid toward your home.

But you may decide the peace of mind of having a paid-off house is worth the cost that comes with devoting extra cash to a low-interest loan. If you make that choice, just be aware of the downsides so you can make the decision with both eyes open.

The Ascent's Best Mortgage Lender of 2022

Mortgage rates are at their highest level in years — and expected to keep rising. It is more important than ever to check your rates with multiple lenders to secure the best rate possible while minimizing fees. Even a small difference in your rate could shave hundreds off your monthly payment.

That is where Better Mortgage comes in.

You can get pre-approved in as little as 3 minutes, with no hard credit check, and lock your rate at any time. Another plus? They don’t charge origination or lender fees (which can be as high as 2% of the loan amount for some lenders).

Read our free review

About the Author