What happens if I pay two extra mortgage payments a year?

While borrowers often have the option to make additional payments towards their mortgage, experts caution that it might not always be the optimal strategy, even if the goal is to pay off the mortgage ahead of schedule.

The reason is that any extra payment made in a given month is considered as an additional payment for that specific month, rather than an early payment for the upcoming month. Although this extra payment contributes to reducing the principal, you’ll still be on the hook for the regular monthly mortgage due in the next month. The silver lining is that making these additional payments allows you to chip away at your debt more efficiently and swiftly, given that a larger portion tackles the principal.

If you’re aiming to make early payments, it’s essential to reach out to your mortgage lender. This ensures that your payment is properly designated as an early payment rather than an extra payment.

However, making extra payments might not be the wisest choice if:

• Your loan has lower interest rates than the current market rates. In that case, consider channeling those funds toward paying off other debts or exploring alternative investments.
• You’re debt-free. Instead of making extra mortgage payments, you might explore using that money for other investment opportunities, such as a brokerage account or bolstering your retirement savings.