Mortgage Prepayment Options

Learn how to navigate the mortgage prepayment process

Looking to save a little money on your mortgage? You could consider prepaying your mortgage. Just like it sounds, prepaying means submitting more to the loan company than is required. Depending on how you go about this and if your lender allows it, this can be a way to reduce the number of payments you'll need to make over the life of your loan, which in turn saves you money as less interest will accrue. Learn more about the mortgage prepayment process below.

1. Determine if you should prepay your mortgage

It's not for everyone. If you have a low interest rate and a monthly mortgage payment that fits your current budget, trying to prepay may strain your finances. You may also decide against prepaying if you're currently paying off other debts like student loans, car loans, credit card debt or medical bills.


Finally, your mortgage may also carry prepayment penalties. If that's the case, the cost of prepaying may be cost prohibitive.

2. Use a mortgage prepayment calculator

To see if prepayment makes sense for your unique situation and to view your mortgage prepayment options, use our monthly payment calculator. This calculator will show you your amortization schedule, which outlines the progress you're making on paying down your mortgage. You can then enter various prepayment scenarios to see how much your monthly payments could increase and how much you'll save on interest in the end.

3. Confirm mortgage prepayments will be applied to the principal

Your monthly mortgage payments are comprised of both the loan principal and the interest. When you pay more than the monthly payment, contact your lender to specify where you want that extra money to go. Your lender may need something in writing or they may just note it over the phone. But, make sure that the extra funds are applied to the principal. Otherwise, you're not actually prepaying your mortgage; you're just paying interest.

4. Decide how you'll go about prepaying your mortgage loan

There are several ways you can go about increasing your monthly mortgage payment amount:

  • Pay a little bit extra on each payment. Whether you tack on the same amount each month or a varying amount according to what you can afford, this can chip away at the principal.
  • Pay an extra mortgage payment each year. You can either pay a double payment one month or divide your monthly payment by 12 and add that amount to your payment each month.
  • Explore a bi-weekly payment option. When you pay your mortgage every two weeks, depending on the structure of those payments, you may end up paying a little extra each month or as much as double your original single monthly payment.
  • Add an extra dollar each month. This plan lets you start small and build. In the first month, pay an extra dollar. For the second month, pay two extra dollars, and so on. At first blush, you may think this could get unmanageable, but remember that there are 360 monthly payments during the course of a 30-year mortgage. So, the most you'll ever pay in addition to your regular payment is $360.

5. Set up automatic payments for your mortgage prepayment

If you're like many homeowners, you probably elected to set up automatic payments for your mortgage so that you'll never miss a payment. It's possible to do this for a mortgage prepayment as well, but again, you'll want to contact your lender to confirm how your prepayment should be noted. For example, you may need to set up a separate automatic payment for the extra funds and include a note or comment indicating it should be applied to the principal. You may also just be able to increase the amount of your monthly payment. In addition to the ease of 'set it and forget it,' setting up automatic payments can also help you stick to your prepayment plan.

Learn more about mortgage prepayment options with Citizens Bank

If you still have questions related to prepaying your mortgage or perhaps just mortgage questions in general, contact a Citizens Bank home loan advisor at 1-888-514-2300.