How to Save Thousands on Interest Over the Life of Your Loan

If you have a mortgage or are planning to get one, you’re probably thinking about more than just the monthly payment. You’re also thinking about how to save money on your mortgage over time. The truth is, most people end up paying far more than the original loan amount once interest is added in. But with the right moves, you can bring that number down. In many cases, these changes aren’t complicated. They’re just things most homeowners never think to do.

A Shorter Loan Term Can Cut Interest Drastically

One of the easiest ways to save money on your mortgage is by choosing a shorter loan term. Most people go with a 30-year mortgage because it makes the monthly payments more affordable. But a 15- or 20-year loan can save you tens of thousands of dollars in the long run. The payments will be higher each month, but the total interest you pay will be much lower.

Let’s take that same $300,000 loan. If you get a 30-year mortgage at 6%, you’re looking at paying over $647,000 in total. If you take a 15-year mortgage at 5.5%, the total drops to about $441,000. That’s over $200,000 in savings just for paying it off faster. If the higher monthly payments don’t work for your budget right now, consider starting with a 30-year loan and making extra payments when you can. That brings down your interest without locking you into a shorter term.

If you're wondering whether it’s worth switching loan terms, take a look at the pros and cons of refinancing to a shorter loan term. It breaks down how to weigh the bigger payments now against the long-term interest savings.

A Bigger Down Payment Pays Off Long-Term

Saving up for a larger down payment might feel like a stretch, but it can lead to big savings. Putting down 20% or more can help you avoid private mortgage insurance, also known as PMI. That’s an extra fee lenders charge when your down payment is below a certain amount, usually 20%. PMI can cost hundreds of dollars each month and doesn’t go toward your loan balance.

On top of avoiding PMI, a bigger down payment reduces your loan amount. That means you pay interest on a smaller balance, which leads to savings month after month. And lenders may offer you a better interest rate if you’re borrowing less, since you’re considered a lower-risk borrower. It’s a win across the board. For example, if you’re buying a $400,000 home and you put down 10%, you’ll borrow $360,000. But if you can put down 20%, you only need to borrow $320,000. That difference alone could save you thousands over the life of your loan.

Source: Synchrony: What’s the “Right” Down Payment on a House?

Your Credit Score Matters More Than You Think

Many people don’t realize how much their credit score affects their mortgage rate. Even a small bump in your score can lower your rate and save you money. Before you apply for a loan, check your credit score and look for any errors in your credit report. Fixing mistakes, paying off debt, and making sure you pay bills on time can all help improve your score.

Let’s say your score is 660. You might be offered a 7% interest rate. But if you improve your score to 740, that rate could drop to 6% or even lower. On a $300,000 loan, that 1% difference can save you over $60,000 in interest across 30 years. Taking a few months to build your credit before applying could be well worth the effort.

Make Extra Payments Whenever You Can

One of the simplest ways to save money on your mortgage is by making extra payments. Any extra amount you pay goes directly toward the principal balance, which lowers the amount of interest that builds up over time. Even small extra payments make a difference.

For example, if you pay an extra $100 each month on a 30-year loan, you could shave off several years from your loan term and save thousands in interest. You don’t have to commit to a fixed extra payment either. If you get a bonus at work, a tax refund, or even just skip eating out for a month, you can throw that extra cash at your mortgage.

If you're unsure how to do this effectively, check out our guide on how to pay off your mortgage faster without extra fees. It shows you how to knock down your loan balance without penalties and without putting a strain on your budget.

Try Biweekly Payments Instead of Monthly

Biweekly payments are another smart way to reduce your loan balance faster without making a huge change to your budget. Instead of making one payment each month, you make half a payment every two weeks. Since there are 52 weeks in a year, you end up making 26 half-payments. That adds up to 13 full payments a year instead of 12.

That one extra payment each year goes straight toward your principal, which shortens your loan and cuts interest costs. If you want to learn more about whether it’s right for you, read our post on whether biweekly mortgage payments are worth it. It explains how the numbers work out and whether this method fits your situation.

Refinancing Can Help You Lock in a Better Rate

If interest rates have dropped since you got your mortgage, it might be worth looking into refinancing. Refinancing means replacing your current loan with a new one that has better terms. That could mean a lower interest rate, a shorter term, or both.

People often ask how refinancing at a lower rate helps. The answer is pretty simple. A lower rate means you pay less in interest over the life of the loan. For example, if you refinance from 7% to 5.5% on a $300,000 loan, your monthly payment could drop by a few hundred dollars, and you could save tens of thousands in interest.

Before refinancing, make sure to look at the costs. Lenders usually charge fees for closing a new loan. If you’re planning to stay in your home for at least a few more years, refinancing might make sense. If you’re planning to move soon, the savings might not be worth the upfront costs.

Consider Mortgage Recasting if You Come Into Extra Cash

If you receive a large lump sum of money — maybe from a bonus, inheritance, or selling another property — one option worth looking into is mortgage recasting. This isn’t as well known as refinancing, but it can still save you money. With a recast, you make a large payment toward your principal, and your lender recalculates your monthly payments based on the new balance.

The loan term stays the same, but your monthly payments go down, and so does the total interest you’ll pay. It’s a great option if you want to stay with your current loan and interest rate but still take advantage of a big payment.

Paying Off Your Mortgage Early Has Real Benefits

Some people wonder if paying off a mortgage early is worth it. The answer depends on your financial goals, but there’s no denying that paying less interest and freeing up your budget is a big plus. Once your mortgage is gone, that monthly payment can be redirected toward other goals — saving for retirement, helping with college expenses, investing, or even just enjoying a bit more breathing room.

If you can’t pay it off all at once, that’s okay. Every little bit helps. Even just rounding up your monthly payment or throwing in an extra hundred dollars here and there can make a difference over time.

Ready to Save? Let’s Talk

Saving money on your mortgage doesn’t have to be complicated. From making extra payments to refinancing or choosing the right loan term, every step you take now can lead to big savings later. If you’re thinking about refinancing, recasting, or just want to talk through your options, we’re here to help.

Give us a call at (813) 343-4775 or schedule a free consultation to learn how much you could save on your loan and start taking control of your financial future.