To accelerate mortgage payoff, consider curtailment or refinancing. Curtailment means making extra principal payments, significantly reducing total interest and shortening the loan term without fees—showing how simple curtailment strategies reduce your mortgage fast. Refinancing replaces your loan, usually for a lower rate, potentially reducing monthly payments but incurring closing costs. Choose based on your current rate, financial goals, and desired long-term savings.
In this guide, we’ll break down curtailment vs. refinancing in plain English, offer real-world number examples, and help you decide which strategy saves you more over time.
What Is Mortgage Curtailment?
Curtailment simply means making extra payments toward your mortgage principal—either occasionally or in lump sums—to reduce your balance faster.
Types of Curtailment:
- Partial Curtailment: Extra payments made alongside your regular monthly installment.
- Full Curtailment: A one-time large payment (e.g., bonus, inheritance) that significantly reduces your loan balance.
Benefits of Curtailment:
- Lowers total interest paid
- Shortens loan term (if you keep making normal payments)
- No need to apply or pay fees (unlike refinancing)
Example:
Let’s say you have a $300,000 mortgage at 6% interest over 30 years.
- Your monthly principal and interest is about $1,799
- If you add $200/month extra toward principal:
- You’ll pay off the loan 5.5 years early
- You save around $69,000 in interest
Tip: Use a mortgage curtailment calculator to test your own numbers.
What Is Refinancing?
Refinancing means replacing your current mortgage with a new one—usually to get a lower interest rate or better terms.
Common Reasons to Refinance:
- Lower monthly payments
- Reduce interest rate
- Switch loan types (e.g., ARM to fixed)
- Cash-out some equity
Example:
Same original mortgage: $300,000 at 6%, with 25 years remaining.
If you refinance to a 5% loan for 25 years, your new monthly payment drops to $1,753—a savings of about $46/month. Over time, you’d save around $13,800 in interest.
But remember:
- Closing costs (typically 2–6% of loan)
- Restarting the clock on a 30-year term may erase savings
Related: What Mortgage Refinancing Costs Are Tax-Deductible?
Curtailment vs. Refinancing: A Side-by-Side Comparison
Feature |
Curtailment |
Refinancing |
| Involves Loan Replacement? | ❌ No | ✅ Yes |
| Upfront Costs | ✅ None (unless fees for payment limits) | ❌ Yes (2–6% of loan amount) |
| Monthly Payment Impact | 🚫 No change to scheduled payment | ✅ Can reduce monthly obligation |
| Loan Term Impact | ✅ Shortens term if you continue payments | ❌ Not unless you refinance to a shorter term |
| Interest Savings Potential | ✅ High (if consistent) | ✅ Moderate (depends on rate difference) |
| Flexibility | ✅ High (make extra payments anytime) | ❌ Requires approval and paperwork |
When Is Curtailment Better?
Choose curtailment if:
- You plan to stay in your home long-term
- You’re comfortable paying the same monthly amount
- You want to reduce total interest without paying fees
- You’ve already locked in a competitive interest rate
When Is Refinancing Better?
Refinance if:
- Interest rates have dropped 1% or more from your current rate
- You want lower monthly payments to improve cash flow
- You’re okay with paying closing costs
- Your credit score has improved, qualifying you for better terms
Pro Tips to Maximize Savings
- Combine strategies: Refinance to a lower rate and make extra payments post-refi for double the savings.
- Check prepayment penalties: Some mortgages charge fees if you pay off early.
- Make payments early in the month: It reduces interest more effectively.
- Recast instead of refinance: Some lenders let you lower monthly payments after a large curtailment without a new loan.
Frequently Asked Questions
Can I curtail and refinance at the same time?
Yes! You can refinance, then make extra payments on the new loan.
Will curtailment hurt my credit score?
No. In fact, paying down debt improves your credit health over time.
How much can I save if I curtail early in the loan?
The earlier you pay extra, the more interest you save—potentially tens of thousands.
Conclusion:
If you already have a low interest rate and want to pay off your loan faster without extra fees, curtailment (making extra payments) is a simple and effective way to save money on interest. But if your current rate is high, and you’re looking to lower your monthly payments or reduce your interest over time, refinancing could be the better choice—especially if you plan to stay in your home for a while. Take time to compare your options, and check out related guides on mortgage terms, payoff strategies, and the best time to refinance.