Yahoo Finance
About 1 in 4 mortgage holders make extra payments on their loans, according to a recentreportfrom Rocket Mortgage.
The analysis invites a question: Is paying extra on a mortgage a good idea? If you kick in an additional $50 or $100 on every monthly mortgage payment, you gradually shorten the length of the loan.
You also save money on interest: potentially, tens of thousands of dollars.
But mortgages tend to have lower interest rates than other loans.
If you have a credit card, personal loan or home equity loan, you're probably paying higher borrowing costs on that loan than on your mortgage.
"For a lot of people, even if their mortgage is their largest debt, dollar-wise, it also tends to be their debt with the lowest interest rate," saidKate Wood, a lending expert at NerdWallet.
The Rocket Mortgage analysis, based on payments by its customers, found that at least 25% of borrowers have made extra principal payments over the past five years.
The rate of extra payments peaked in 2021 and 2022, an era of historically low rates, and has gradually declined in the years since.
Paying extra on a mortgage would seem to make the most sense for borrowers with the highest interest rates because they stand to save the most money with additional payments.
The Rocket Mortgage report found, however, that extra payments were more prevalent among borrowers with lower rates.
"To have a quarter of your entire book of business making extra payments suggests that it's not just math, it's psychology," said Bill Banfield, chief business officer at Rocket Mortgage.
Millions of homeowners dream of repaying their mortgages ahead of schedule.
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