Is it Better to Overpay Mortgage or Reduce Term?

Is it Better to Overpay Mortgage or Reduce Term?

If you’re a homeowner, you may be wondering, ‘is it better to overpay mortgage or to reduce the term?’ Keep reading to find out.

Mortgage Interest Rates

When it comes to saving money on your mortgage, the question is often is it better to overpay mortgage or reduce the term? It turns out that the best way to save money on your mortgage is to make large monthly payments on a short-term loan that’s paid off in a few years. Any time your monthly payments are higher than a predetermined amount, you’re losing money. It is possible to afford your mortgage payments while also saving money. So why choose to make a smaller monthly payment that will be paid off sooner?

Reducing the Term

If you have 30 years remaining on your mortgage, you can almost certainly reduce the term by 15% to free up additional cash. But, before you do this, you should probably think about your ability to save enough money each month to do this. If you can’t, then you can’t. 

Is It Better to Overpay Your Mortgage or Reduce Term?

Let’s say that your current mortgage interest rate is 5%. Assuming your house value has risen by 20% over the past three years, your monthly payment is at least $2,085. You have no other debts, and your mortgage is all you have. So, you decide to make some extra payments. You decide to start making extra payments at an additional rate of 2% instead of 1%, and you earn 20 other payments at a different rate of 2% instead of 1%. If you make 20 additional payments at 2%, you will pay off your entire mortgage in 10.5 years. If you pay off your total mortgage at 1%, you will be paying 10.5 years instead. Does that sound more like a good idea to you? Keep in mind that 20 additional payments are a lot of extra payments. It can make a big difference in your budget.


No matter what type of mortgage you have, it’s best to pay it down as much as possible. You’ll free up cash flow for yourself, your family, and your house when you can do this. Overpaying your mortgage reduces the interest you pay. This is great for you, as it increases the funds you can use to save or invest, pay down debt, and improve your overall quality of life. 

Contact Utah Sell Now
Now that we’ve answered the question, ‘is it better to overpay mortgage or reduce term?,’ contact the experts at Utah Sell Now today. We buy homes in the Salt Lake City, Utah, area in any condition fast and in cash so you don’t have to go through the hassle of staging and showing your home, or paying a realtor. Call us for your no-obligation written offer and you could have money in hand for your home in as little as seven days.

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