Rocket Mortgage found that the wrong people are paying off their mortgages: at least 25% of its borrowers made extra principal payments over the past five years, and those payments were more common among borrowers with lower mortgage rates. A small monthly add-on can still trim years off a loan and save tens of thousands of dollars, but the pattern suggests many borrowers are choosing speed over a different use for that cash.
Bill Banfield Sees Psychology
25% of borrowers making extra payments is a large enough share to matter, according to Bill Banfield, the chief business officer at Rocket Mortgage. He said, “To have a quarter of your entire book of business making extra payments suggests that it’s not just math, it’s psychology.”
50 dollars or 100 dollars added to a monthly mortgage payment can gradually shorten the loan term. That matters most for borrowers who want to reduce interest over time, but it also means each extra dollar has to compete with other uses, including debt carrying higher rates or money that could be invested elsewhere.
Lower Rates, Faster Payoff
Kate Wood, a lending expert at NerdWallet, said, “For a lot of people, even if their mortgage is their largest debt, dollar-wise, it also tends to be their debt with the lowest interest rate.” The Rocket Mortgage analysis found extra principal payments were more prevalent among borrowers with lower rates, even though the biggest savings from paying early usually come when the rate is higher.
One-fifth of mortgage holders have rates under 3%, according to Bankrate, and Michelle Singletary repaid her 2.75% mortgage several years early. That creates the core tradeoff: a borrower can feel good about killing a mortgage faster, yet the math often favors directing spare cash toward higher-rate debt first.
2021 And 2022 Peak
The rate of extra payments peaked in 2021 and 2022, then gradually declined in the years since 2022. Rocket Mortgage’s five-year view shows that the behavior has not disappeared, but it is no longer at its high-water mark.
Older Americans “are really interested in the idea of being debt-free,” Wood said, while younger homeowners, “when they come into money, they’re more interested in investing it than in paying down their mortgage,” she added. Millions of homeowners still dream of owning a home free and clear, but the practical move depends on whether the borrower is chasing peace of mind, lower interest costs, or a better return somewhere else.
