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Save Big on Your Mortgage: Effective Interest Reduction Strategies

4 Min Read • 05/12/2024

For many homeowners, the mortgage is not only a ticket to homeownership but also one of their largest monthly expenses. Over the life of a typical home loan, interest can amount to a significant financial burden. However, with the right strategies, you can dramatically reduce the amount of interest you pay, saving money and potentially shortening your loan term. Here’s how you can start saving on mortgage interest today.

1. Refinance at a Lower Interest Rate

Refinancing your mortgage to secure a lower interest rate is one of the most effective ways to reduce the amount of interest you pay over the life of your loan.

How It Works:

When you refinance, you take out a new mortgage at current interest rates to pay off your existing mortgage. This strategy is especially beneficial when interest rates have dropped since you originally financed your home.


  • Reduced Monthly Payments: Lower interest rates mean lower monthly payments, allowing you to save or redirect funds elsewhere.

  • Overall Interest Savings: A lower rate decreases the total amount of interest paid over the duration of your loan, potentially saving you thousands.

2. Shorten Your Loan Term

Choosing a shorter loan term when you refinance or initially finance your home can lead to substantial interest savings.

How It Works:

Shorter loan terms, such as 15 years instead of 30, typically come with lower interest rates and mean you’ll pay interest over fewer years.


  • Less Interest Paid Overall: Although monthly payments are higher with a shorter loan term, the total interest paid over the life of the loan is much lower.

  • Build Equity Faster: You’ll own your home outright sooner, which is particularly beneficial if you plan to retire or reduce your debt load quickly.

3. Make Extra Principal Payments

Making additional payments towards your mortgage principal can significantly reduce the amount of interest you pay.

How It Works:

You can make lump-sum payments or add an extra amount to your regular monthly payment. Even small additional payments can have a significant impact over the life of your mortgage.


  • Reduce Loan Balance: Each extra payment reduces your principal balance and shortens the term of your loan.

  • Save on Interest: Less principal means less interest charged, helping you save money in the long run.

4. Use a Biweekly Payment Schedule

Switching to a biweekly payment schedule is an effective way to reduce your mortgage interest and pay off your loan sooner.

How It Works:

Instead of making one monthly payment, you make half the payment every two weeks. Since there are 52 weeks in a year, you’ll make 26 half-payments, or 13 full payments per year, instead of the usual 12.


  • Faster Loan Repayment: The extra payment each year goes directly toward reducing the principal, which decreases the amount of interest.

  • Consistent Savings: This method can shave years off your mortgage term and save you significant amounts on interest.

5. Consider an Adjustable-Rate Mortgage

For those who plan on moving or refinancing within a few years, an adjustable-rate mortgage (ARM) might offer lower initial interest rates.

How It Works:

ARMs typically offer lower interest rates than fixed-rate mortgages for a set initial period (such as 5, 7, or 10 years), after which the rate adjusts with the market.


  • Lower Initial Payments: You benefit from lower payments when the interest rate is reduced during the initial fixed period.

  • Potential Interest Savings: If market rates stay low or drop further, you could continue to save on interest beyond the initial period.


Paying less interest on your mortgage is achievable through a variety of strategies. Whether it’s refinancing to a lower rate, opting for a shorter loan term, making extra payments, or using a biweekly payment schedule, each method offers unique benefits. Assess your financial situation, future plans, and current mortgage terms to determine which strategy aligns best with your goals and can lead to the most savings on your mortgage interest.

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