About 1 in 4 mortgage holders are making extra payments, and the pattern is not where many people would expect it. Rocket Mortgage found that at least 25% of borrowers made extra principal payments over the past five years, even as those payments were more common among borrowers with lower rates.
That is why the wrong people are paying off their mortgages is showing up now as a question, not just a headline. The share of borrowers making extra payments peaked in 2021 and 2022 and has gradually declined since, but the practice is still widespread enough to matter for anyone deciding whether extra cash should go toward a mortgage, a savings account or another debt.
The reason the finding stands out is simple: extra payments are supposed to make the most sense for the highest-rate debt, yet mortgages often sit at the low end of a household balance sheet. Mortgage rates are usually lower than credit cards, personal loans or home equity loans, and Bankrate says one-fifth of mortgage holders have rates under 3%. That makes the behavior look less like a math exercise and more like a choice about what kind of financial life people want to have.
Kate Wood said that for a lot of people, a mortgage is their debt with the lowest interest rate even when it is the biggest number on the page. She said younger homeowners who come into money are more likely to invest it, while older Americans are drawn to the idea of being debt-free. Michelle Singletary, for her part, said in 2023 that she had repaid her 2.75% mortgage several years early, a reminder that the urge to clear a home loan can be emotional even when the rate is low.
That is also where the friction sits. Some financial advisers warn against rushing extra money toward a low-interest mortgage if higher-rate debts are still hanging around, because the interest saved by paying off the home loan early may be smaller than the benefit of attacking other balances first. But Bill Banfield said that a quarter of Rocket Mortgage’s book making extra payments suggests it is not just math, it is psychology.
The next question is not whether the habit exists. Rocket Mortgage has already shown that it does. The harder question is why so many borrowers with the lowest rates are the ones most likely to send in extra principal, and whether that preference will hold as rates and household budgets keep shifting.
