Should I Make One Extra Mortgage Payment Each Year ?

Owning a home is one of the biggest financial commitments most people make. With a mortgage often lasting 15 to 30 years, many homeowners look for ways to pay it off faster and save money in the process. One popular strategy is making one extra mortgage payment each year. But is it worth it?

A mortgage payment typically includes both principal (the amount borrowed) and interest (the cost of borrowing). In the early years of a mortgage, most of the payment goes toward interest rather than principal. By making one additional payment each year, the extra amount goes directly toward reducing the principal balance. This lowers the total interest paid over the life of the loan and shortens the repayment period.

Ways to Make an Extra Payment

• Lump Sum Payment: Make one additional full payment at any point during the year.

• Biweekly Payments: Split the monthly payment in half and pay every two weeks. This results in 26 half-payments, or 13 full payments per year.

• Round Up Payments: Round up each monthly payment to the nearest hundred dollars. Over time, these small increases add up to an extra payment.

Things to Consider

Before committing to extra payments, check with the lender to ensure there are no prepayment penalties. It’s also important to maintain an emergency fund and pay off higher-interest debts first, such as credit cards or personal loans.

Making one extra mortgage payment each year can be a smart financial move for many homeowners. It reduces interest costs, builds equity faster, and shortens the loan term. However, the decision should align with overall financial goals and priorities. For those with stable finances and a long-term home plan, this simple strategy can lead to substantial savings and a faster path to mortgage freedom.