November 10, 2025
Securing a good rate matters—but the biggest long-term savings come from lowering your principal faster. With rates leveling off and big cuts unlikely in the near term, small, consistent changes can shave years off your amortization and save thousands in interest. The good news: you don’t need to overhaul your budget to see real progress. A few targeted tweaks, timed correctly within your lender’s prepayment rules, can quietly accelerate your payoff while keeping monthly cash flow comfortable.
Make one early lump-sum. If your lender allows 10–20% annual prepayments, consider making a single lump-sum as soon as your new term starts (or at renewal). Dollars paid early work the hardest because they reduce interest for the entire remaining term. Even a modest lump-sum can lower the interest charged every month thereafter. If cash is tight, aim for a one-time contribution tied to a bonus, tax refund, or savings surplus.
Switch to “accelerated” payments. Accelerated bi-weekly or weekly payments effectively make the equivalent of one extra monthly payment each year without a big monthly jump. This structure reduces your principal faster and can trim multiple years off a 25-year schedule. If you’re already bi-weekly, ask your lender to round your payment up by a small, fixed amount—an extra $25–$50 per payment compounds meaningfully over time.
Shorten your amortization at renewal. When your term ends, consider resetting to a shorter amortization if the payment still fits your budget. Moving from 25 years to 20 years increases the payment modestly, but the five-year interest savings can outweigh the extra monthly cost—and you lock in faster equity building without needing to remember ad-hoc prepayments.
Final tip: keep an emergency cushion. Aggressive prepayments shouldn’t leave you exposed. Build (and keep) a basic reserve so a surprise bill doesn’t force you to borrow at higher interest elsewhere. A balanced plan—one early lump-sum, accelerated payments, and a shorter amortization at renewal—lets you reduce principal faster with minimal pain while staying flexible for whatever 2026 brings.
Source: Absolute Mortgage Team