What Are Accelerated Mortgage Payments?

Accelerated mortgage payments are payments made towards the principal of a mortgage loan that exceed the minimum required payment. Most mortgages are issued on a fixed term, frequently 15 or 30 years. Borrowers are usually required to make a certain payment every month for the duration of the mortgage. Paying more than what is required or making multiple monthly payments usually reduces the life of the mortgage and cuts down on the interest owed. These sorts of additional payments are known as advanced mortgage payments.

In many ways, accelerated mortgage payments are little more than extra mortgage payments. Houses are some of the most expensive things that people can buy, and mortgage loans are accordingly some of the biggest debts that people carry. The sooner the debt can be paid off, the sooner homeowners can enjoy full ownership of the property. Accelerated mortgage payments give homeowners the option of paying down the principal little by little whenever they have extra money.

Mortgage rates are typically calculated as the total cost of the home that is purchased plus interest. Payments are usually structured according to an amortization schedule. The schedule is subject to change depending on whether the interest rate is fixed, the duration of the mortgage, whether the mortgage has been refinanced, and other factors. In nearly all cases, however, each monthly payment goes partly to pay the principal and partly to pay the interest.

Most of the time, borrowers are permitted to pay more than the monthly amortization schedule shows is due in the form of accelerated mortgage payments. This kind of additional money usually goes into the principal of the loan. The lower the principal, the lower the interest rates will be — and the faster the loan will be paid off. Even sporadic overpayments, or overpayments of small amounts, can dramatically decrease the life of the loan over time. Accelerated mortgage payments are often known as “accelerated mortgage payoff” for this reason.

There are many different ways to make accelerated mortgage payments. Simply paying a larger amount than is owed each month is usually the simplest. Bi-weekly payments can also be made if the borrower’s finances permit. If a mortgage is managed online, online mortgage payments can usually also be made at any time, whether or not affiliated with regular monthly payments.

Mortgages are not the only types of loans with accelerated payment schemes. Accelerated car payments and credit card payments, like accelerated house payments, typically allow borrowers to more quickly realize debt-free enjoyment of goods. Not all mortgage lenders or financiers permit accelerated payments, but most do. Borrowers interested in accelerated mortgage payments should ask their broker for more information.