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Mortgage Payment Options

Learn how to structure your home loan payment schedule and save money

A few weeks after you move into your new home, you'll receive paperwork from your mortgage lender detailing your repayment schedule. At that point, you can sign up for automatic mortgage payments, which means you'll never forget one or be late. That's clearly the most important thing when it comes to repaying the loan. But, you do have the power to do more with your monthly home loan payment. Here are four ways to structure your payments and alter your mortgage payment amount so you can save yourself a little money in interest.

1. Add a few extra dollars to your monthly mortgage payment

Mortgage interest is compounding interest, meaning that interest is charged each month on the principal and the interest you've already accrued. One of the best things you can do to save a little money is increase your mortgage payment amount by a few dollars. Whether it's paying an extra $25 per month or you choose to round up to the next $50 or $100 from the listed amount, you can make more headway on the principal faster. And, by reducing the principal, you'll reduce the interest that's accruing.

If you do this, be sure to contact your lender and make sure there are no mortgage prepayment penalties you'll face. Also, clarify that you want the extra funds applied to the principal of the loan, not the interest. Particularly if you're still in the early days of repayment, your monthly mortgage payment amount is primarily comprised of interest and a little principal, so it's possible that the extra money you pay may be applied to the interest, unless specifically communicated.

2. Add an extra home loan payment every year

If you need more structure to stay on track, make an extra payment each year. Contact your lender to see how best to do this. If it's allowed by the terms of your loan and you can afford it, you could just send a double payment at the end of the year. If you'd rather space it out, divide your monthly mortgage payment amount by 12 and add that amount to each payment. Depending on your loan amount and interest rate, it's possible that you could pay off a 30-year mortgage in just 22 years by submitting an extra payment every year.

3. Put unforeseen income toward your mortgage

Whether you have tax refunds, bonuses, commissions, inheritances, credit card rewards or investment dividends, you may find yourself with more cash on hand than you originally expected. One smart use for these funds is to apply them to your mortgage principal. Again, be sure to investigate prepayment requirements and possible penalties.

4. See if you can switch to bi-weekly mortgage payments

Talk to your lender to see if you can work out a bi-weekly payment option. If your lender doesn't offer an actual payment plan for this type of payment talk to them about setting it up on your own through your online bank account. Every two weeks, you’ll pay a mortgage payment, and those two payments added together will be a little larger than your previous monthly payment. For example, if your monthly payment is $1,200, you may pay $700 every two weeks on a biweekly plan. If you set this type of payment up yourself through your online account, consider paying a little extra as well to help pay off your mortgage faster (make sure to have the extra applied to the principal).

In addition to helping you pay off the loan faster, bi-weekly payments can also be more convenient for your budget so you don’t have to account for such a large payment at the end of the month. Talk with your lender about this option and to see how much faster it will allow you to pay off your mortgage.

Learn more about flexible mortgage payment options from Citizens Bank

Whether you're applying for a new mortgage with Citizens Bank or looking to explore your mortgage payment options on an existing home loan, we can help. Just call a home loan advisor at 1-888-514-2300 to get answers to your questions.



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Mortgages and Home Equity Loans are offered and originated by Citizens Bank, N.A. (NMLS ID# 433960).