Should You Pay Off Your Mortgage Early?

Two different kinds of return

The simplest version of the math: if your mortgage rate is meaningfully below the long-run market average, the expected-value case leans toward investing. If your rate is at or above that average — as some buyers who locked in during 2023–2024 experienced — paying down the mortgage can win on both expected value and certainty at once. Either way, expected value is not the same as certainty, and a guaranteed return has real value that a spreadsheet doesn't fully capture.

What extra payments do (and don't do) to PMI

A common mistake: assuming extra principal shrinks your PMI premium. It doesn't. PMI is priced against your current loan-to-value ratio, and it ends entirely, not gradually, once you cross a threshold. Under the Homeowners Protection Act, your servicer must automatically terminate PMI when your balance is scheduled to reach 78% of the original home value, and you can request cancellation once you reach 80%, per the CFPB.

The mortgage interest deduction, honestly

The deduction only reduces your taxes if you itemize, and most filers don't. The IRS's 2026 standard deduction is $16,100 for single filers and $32,200 for married filing jointly — high enough that most filers take the standard deduction rather than itemize. If that's you, the mortgage interest deduction is not actually lowering your after-tax borrowing cost, and “but I get a tax break” is not a reason to keep the loan outstanding longer.

If you do itemize — typically because of a large mortgage, high state and local taxes, or significant charitable giving — the deduction lowers your effective rate somewhat, which nudges the math slightly toward investing. It rarely flips the decision on its own.

Where extra mortgage payments fit in your order of operations

1. 01

   Emergency fund first

   Home equity is not liquid. Have cash reserves before locking more money into the house.

2. 02

   Capture the full employer 401(k) match

   An immediate, guaranteed return that no mortgage payoff or market return beats — never leave it uncaptured to prepay a mortgage.

3. 03

   Pay off higher-interest debt

   Credit cards and personal loans typically run well above any mortgage rate. Clear those before extra mortgage principal.

4. 04

   Then decide: extra principal vs. investing the rest

   This is where the rate-vs-expected-return trade-off above actually applies — after the higher-certainty, higher-return moves are already made.

Recast, refinance, or just pay extra?

These are three different tools for three different goals, and confusing them leads to the wrong one:

• Extra principal payments, no recast. Your required monthly payment stays the same; the loan just pays off faster and total interest drops. This is what an early payoff calculator models.
• Recast. A lump sum (most lenders want $5,000–$10,000 minimum) followed by the lender re-amortizing your remaining balance over the same term at the same rate — your required monthly payment goes down. Recast fees run roughly $150–$500, per Bankrate, far less than a refinance.
• Refinance. Replaces the loan entirely — can change your rate and term, but comes with full closing costs. Only worth comparing against payoff if today's rates are meaningfully better than your current one.

If your goal is a smaller required monthly bill without touching your rate, a recast usually beats a refinance on cost. If your goal is simply less total interest and you don't need the lower required payment, skip the recast fee and just send extra principal.