Nearly one in four homeowners are accelerating their mortgage payoffs through extra principal payments each year, but the people making these payments are often the wrong ones financially, according to new data from Rocket Mortgage. An analysis of nearly 3 million loans across all 50 states over five years shows that homeowners with the lowest interest rates are most likely to pay extra—even though those with higher rates would save far more money by doing so.
The Rocket Mortgage data, released in late August 2026, found that roughly 25 percent of borrowers make at least one additional principal payment annually. For homeowners who do, the average contribution equals one extra monthly mortgage payment per year.
Making that single extra payment can have substantial long-term effects. On a newly originated 30-year fixed mortgage at the median Rocket Mortgage loan amount of $221,977 with an interest rate of 6.67 percent, homeowners could save approximately $68,000 in interest and pay off their loan nearly six years early by making just one extra payment annually, according to the analysis. Those making slightly more than two additional payments yearly could pay off their loan a full decade early.
The counterintuitive finding is that homeowners with lower mortgage rates—those who locked in ultra-low rates between 2020 and 2022—are more likely to make extra payments than those who bought after rates climbed. This pattern appears driven by budget constraints rather than financial optimization. Homeowners with lower rates have smaller required monthly payments, leaving more room in their budgets to send additional money toward their loan balance. Those with higher-rate mortgages, by contrast, face larger monthly housing costs alongside rising everyday expenses, making it more difficult to consistently pay beyond the minimum.
Bill Banfield, chief business officer at Rocket Mortgage, noted the psychological dimension of the behavior. “To have a quarter of your entire book of business making extra payments suggests that it’s not just math, it’s psychology,” he said. Owning a home free and clear remains an aspirational goal for many American homeowners, even when the financial math doesn’t support accelerating payoff.
When homeowners with higher-rate mortgages do make extra payments, they tend to make much larger lump-sum contributions than their lower-rate counterparts. These larger payments are most common shortly after a mortgage originates, suggesting that early in the loan term, homeowners are particularly focused on reducing debt and building equity.
The Case Against Early Payoff
Financial advisers often caution homeowners against making extra payments on a low-interest mortgage, especially if they carry other debts with higher rates. One-fifth of current mortgage holders have rates under 3 percent, which falls at or near the current inflation rate. In contrast, credit card debt has hit $1.26 trillion, and credit card interest rates typically run 15 to 25 percent or higher.
Kate Wood, a lending expert at NerdWallet, explained the opportunity cost: “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.” Paying extra on a 3 percent mortgage while carrying credit card or personal loan balances at double-digit rates means missing a chance to reduce higher-cost debt first.
The current mortgage environment makes this trade-off even sharper. The national average rate on a 30-year fixed mortgage stands around 6.75 percent as of early September 2026. Refinancing to a shorter loan term or lower rate looks less attractive now than it did during the 2021-2022 era of historically low rates. For homeowners with sub-4 percent mortgages from that period, investing extra money in the stock market or paying down higher-interest debt could yield better long-term financial outcomes than accelerating mortgage payoff.
Generational differences also shape the debate. Older Americans tend to prioritize the psychological goal of being debt-free, while younger homeowners are more likely to invest surplus money rather than pay down their mortgage. The Rocket Mortgage data suggests this tension plays out across the entire borrower base, with psychology often trumping pure financial optimization.
Sources
- Rocket Mortgage / Rocket Companies — analysis of extra principal payments on nearly 3 million loans across all 50 states from January 2021 through January 2026; savings and payoff acceleration figures
- USA Today — expert commentary from Kate Wood (NerdWallet), Bill Banfield (Rocket Mortgage), and Kara Ng (Zillow); current mortgage rate and context on when early payoff makes financial sense
- The Washington Post — headline reporting on the mismatch between who is paying extra and who would benefit most; quote from Bill Banfield on psychology versus math
- Fast Company — data on the decline in extra payment rates through early 2026 and impact of affordability crisis on homeowner behavior
