Your mortgage is probably the biggest financial commitment you’ll ever take on. Over the life of a typical 15- or 30-year home loan, you could pay tens or even hundreds of thousands of dollars just in interest. The good news? With the right strategies, you can reduce this cost dramatically and keep more of your money for your family, investments, and future goals.
Here’s how to save money on home loan interest—whether you’re shopping for a new mortgage or already paying one off.
Shop Around for the Best Rate Before You Buy
If you’re still in the process of buying a home, this is your best opportunity to secure the lowest possible interest rate.
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Compare multiple lenders. Even a small difference—say 0.25%—translates to thousands over the life of the loan.
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Don’t just look at banks; credit unions and online lenders often offer competitive rates.
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Get formal loan estimates so you can see exact rates, fees, and terms side by side.
Taking the time to compare offers pays off significantly over decades.
Improve Your Credit Score
The better your credit score, the lower the interest rate you’ll typically qualify for.
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Pay bills on time, reduce credit card balances, and avoid opening new credit lines right before applying.
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If your score is borderline, delaying your home purchase by even six months to boost it can lead to a much lower rate.
For example, improving your score from the mid-600s to the mid-700s could save tens of thousands in interest.
Choose a Shorter Loan Term If Possible
A 30-year mortgage keeps monthly payments lower, but you pay much more interest over time.
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A 15-year or 20-year loan usually comes with a lower rate and builds equity faster.
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You’ll pay significantly less interest because you’re borrowing the money for a shorter period.
If you can handle the higher payments, the savings can be huge.
Make Extra Payments Toward Principal
One of the simplest ways to cut interest costs is by paying down your loan faster.
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Just adding a little extra to your monthly payment reduces your principal, meaning less interest accrues.
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Even one additional full payment per year can shorten your mortgage by several years.
Be sure to tell your lender that extra payments go toward principal, not future interest.
Refinance When Rates Drop
If interest rates have fallen since you took out your mortgage, refinancing could save you thousands.
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A lower rate means immediate monthly savings plus dramatically less paid in interest over time.
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Just weigh closing costs against your monthly savings to ensure refinancing makes sense.
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Many lenders will show a “break-even point”—how long it takes for savings to outweigh fees.
If you plan to stay in the home past this point, refinancing is typically a smart move.
Avoid Private Mortgage Insurance (PMI) or Cancel It ASAP
If you bought your home with less than 20% down, you’re probably paying PMI, which protects the lender but adds to your monthly costs.
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Once you reach 20% equity through payments or rising home values, ask to remove PMI.
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Keep an eye on your loan-to-value ratio and request a new appraisal if your home has increased significantly in value.
Eliminating PMI early means more of your money goes to principal and interest.
Make Biweekly Payments Instead of Monthly
By switching to biweekly payments—paying half your mortgage every two weeks—you end up making 26 half-payments (or 13 full payments) per year instead of 12.
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This small adjustment means you pay off your mortgage faster and cut years off the loan term.
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Over time, this reduces the total interest dramatically.
Just confirm with your lender that they accept biweekly payments directly or advise how best to set it up.
Don’t Over-Borrow in the First Place
It’s tempting to stretch your budget to buy a bigger home, but borrowing less saves money from day one.
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A smaller loan means lower monthly payments and less total interest.
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This gives you flexibility to pay off the loan faster or put extra money toward investments.
Living slightly below your means pays dividends for decades.
Avoid Adjustable Rate Mortgages If You Plan to Stay Long-Term
Adjustable rate mortgages (ARMs) often start with low “teaser” rates, but after a few years, rates reset—often higher.
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If interest rates climb, your payments could rise sharply, costing you more in the long run.
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For most people staying in a home long-term, a fixed-rate mortgage is safer and often cheaper overall.
If you’re only planning to live in the home a few years, an ARM might still work—just make sure you’re truly moving before rates adjust.
Use Windfalls to Pay Down Principal
Whenever you get a bonus, tax refund, or other unexpected cash, consider putting at least part of it toward your mortgage.
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One-time lump sums reduce your principal, so you pay interest on a smaller balance moving forward.
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Even occasional extra payments can shave years off your loan.
It’s a simple way to make your money work harder without changing your lifestyle.
A home is more than just a place to live—it’s likely the biggest investment you’ll ever make. By choosing your mortgage wisely, making extra payments when you can, watching interest rates, and keeping an eye on PMI, you’ll save thousands—if not tens of thousands—over the life of your loan.
Most importantly, stay proactive. Review your mortgage annually, keep building your credit, and adjust your strategy as your finances evolve. With these steps, you’ll own your home outright sooner and keep more money in your pocket for the things that matter most.
