How One Extra Mortgage Payment Can Save You 10's of Thousands

 


Paying off your home is one of the biggest financial goals most families dream about. But did you know that a simple habit—just one extra mortgage payment each year—can cut years off your loan and save you tens of thousands in interest?

Let’s walk through a real example.

Loan Amount: $300,000
Interest Rate: 6.5% (6.9% APR)
Term: 30 years

Normal Payoff: 30 years, total interest paid ≈ $383,000
With One Extra Payment Per Year: Paid off in about 24 years, 4 months, interest savings ≈ $84,000

That’s nearly six years of freedom from mortgage payments—and a lot of money back in your pocket.

Why It Works

Mortgages are front-loaded with interest, meaning that in the early years most of your payment goes toward interest rather than principal. By making an additional payment directly to principal each year, you reduce the balance faster, cutting down on the interest charged in future years.

Pros of This Strategy

  • Save Tens of Thousands – In our example, about $84K saved.

  • Pay Off Sooner – Be mortgage-free nearly six years earlier.

  • Build Equity Faster – Own more of your home, sooner.

  • Retirement Flexibility – Enter your later years without a mortgage payment.

Consider the Cons

  • Cash Flow Impact – That extra payment could stretch your budget.

  • Locked Equity – Money applied to the mortgage is not easily accessible in an emergency.

  • Other Opportunities – Investing the same funds could yield higher returns, depending on the market.

A Pro Tip

If one big extra payment feels tough, here’s a simpler approach:
Take your monthly mortgage payment, divide it by 12, and add that amount to each month. By the end of the year, you’ve made a full extra payment—without feeling the pinch.

Final Thoughts

There’s no one-size-fits-all answer. Some homeowners value being debt-free early, while others may prefer to invest extra money for potentially higher returns. What matters most is aligning the strategy with your personal financial goals.

Whether you choose to make that extra payment or not, knowing your options puts you in control of your financial future.

About Between Two Doors

Between Two Doors is a podcast where I talk with Realtors about their journey, aiming to connect home buyers and sellers with agents on a more personal level. I ask "right brain" questions that go beyond transactions, focusing on the experiences, values, and passions that make these professionals great at what they do.

Listen to more episodes at: https://www.betweentwodoors.com

Sponsored by:

Premier Lending, Inc.
https://www.natecarver.com

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NMLS: 2004738
Licensed by the Department of Financial Protection and Innovation (DFPI). Equal Housing Opportunity.
https://www.nmlsconsumeraccess.com


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