With mortgage rates near 6.75% and the median U.S. home price around $441,500, every extra dollar now makes a bigger dent than it did during the low-rate era. Overpaying can help you save on interest and shorten your loan term—but it’s not always the best financial move.
On a $441,500 loan at 6.75%, an extra $100 each month could save you roughly $70,000 over a 30-year period and trim about three years off your loan. A biweekly payment plan—which adds one extra payment per year—could save around $137,000 and shorten the term by six years. Building equity faster brings peace of mind and opens doors for future refinancing, HELOCs, or a more profitable sale.
When Holding Back Might Be Wiser
Overpaying isn’t always the smartest strategy. Consider the opportunity cost: Investing $100 a month in a portfolio earning an average of 8% annually (not guaranteed) could grow to about $75,600 over 30 years—potentially exceeding the interest you’d save. That extra mortgage payment also ties up your cash in home equity, making it harder to access in an emergency unless you refinance or sell. And while fewer homeowners itemize since the 2017 tax law changes, it’s still worth noting that overpaying can reduce the amount of mortgage interest you’re able to deduct.
Priority Check Before You Pay
Erase high-interest debt. A $10,000 credit card balance at 18% costs $1,800 a year—much more than a 6.75% mortgage.
Build your emergency fund. Keep three to six months of expenses on hand to cover unexpected costs.
Capture free retirement money. Max out your 401(k) or IRA contributions, especially if your employer offers matching funds.
Check for prepayment penalties. Rare today, but some nonconforming loans still charge 1%–2% for early payoff.
Smart Shortcuts to Save
Round up your payments. Even $50 extra each month can shave off about $38,000 in interest and 1.5 years from the loan.
Apply windfalls. Use tax refunds, bonuses, or side income to reduce your principal.
Split the difference. Put half your surplus toward the mortgage and invest the other half—balancing debt reduction with long-term growth.
Overpaying makes sense if your mortgage rate is high, your finances are stable, and you plan to stay put. But if you need flexibility or want to prioritize investing, there may be smarter moves. Use a mortgage calculator—or consult a financial adviser—to find the right fit for your situation.
