Paying off your mortgage early might sound like a pipe dream, especially if you’re already stretched thin with monthly bills, groceries, and unexpected expenses. But what if we told you that just one extra mortgage payment a year could significantly reduce the amount of time you’re tied to your home loan and save you tens of thousands in interest?
It might sound too good to be true, but the math is on your side. And the best part? You don’t need to drastically change your lifestyle or double your monthly payments. Just one intentional move each year can put you years ahead financially.
How Mortgage Interest Actually Works
To understand how one extra payment helps, you need to know how interest is calculated on your loan. Most mortgages are amortized, meaning that in the early years, your monthly payments go mostly toward interest rather than the principal. Over time, this shifts, and more of your payment starts going toward the actual loan balance.
This front-loaded interest structure means the more you can knock down your principal early on, the less interest you’ll pay overall. And even small extra payments, if made early and consistently, can have a huge impact.
The Impact of an Annual Extra Payment
Let’s say you have a $300,000 30-year fixed mortgage at a 6% interest rate. Your monthly payment (not including taxes or insurance) would be about $1,799. If you commit to making one additional full payment per year, bringing your total to 13 payments instead of 12, you’ll cut your loan term by roughly 4 to 5 years. Even better? You’ll save over $50,000 in interest in the process.
Now, imagine that you started doing this in year one. By the time your peers are still making mortgage payments in their late 50s, you could be fully mortgage-free, with that money available to redirect toward travel, retirement, or building generational wealth.
How to Actually Make the Extra Payment Work
There are a few smart ways to approach this without feeling financially squeezed. The simplest? Just tack on one additional payment at the end of the year. This works well if you receive a holiday bonus or tax refund. Another method is to divide your monthly mortgage payment by 12 and add that amount to each monthly payment. It’s a smaller bite each month but adds up to the same result by year’s end.
For example, if your mortgage is $1,800, divide that by 12 ($150) and pay $1,950 monthly instead. Over time, that adds up to a full extra payment per year without ever feeling like you’re making a massive financial sacrifice.
You Don’t Need to Be Wealthy to Do This
One of the biggest misconceptions about early mortgage payoff strategies is that they’re only possible if you have a high income. But this approach is surprisingly achievable. Even if you can’t afford an extra full payment, sending an additional few hundred dollars a year toward your principal can still shave months, sometimes more than a year, off your mortgage. The key is consistency. It’s not about paying off your home in five years. It’s about small, strategic actions that snowball into long-term freedom.
What Lenders Don’t Always Tell You
Many lenders won’t go out of their way to promote this strategy. Why? Because the longer you hold the loan, the more interest you pay and the more profit they make. It’s in their best interest for you to stay locked into that 30-year plan. But once you understand how even a single annual payment can alter your entire mortgage timeline, you’re in the driver’s seat.
Just make sure that when you make an extra payment, you specify that it should go toward the principal. Some lenders automatically apply extra payments to interest or future payments, which doesn’t give you the same benefit.
The Psychological Boost Is Real
Beyond the numbers, there’s a mindset shift that happens when you start taking control of your mortgage. Each extra payment becomes a reminder that you’re accelerating toward financial independence. It’s empowering. You’re not just making payments. You’re building equity and reclaiming your financial future.
Even if you only do this for a few years, you’ll make a meaningful dent in your debt and build a stronger sense of control over your finances. And for many homeowners, that peace of mind is worth more than any spreadsheet calculation.
Have you ever tried making an extra mortgage payment, or are you thinking about it now? What’s your biggest challenge when it comes to paying down debt early?
Read More:
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Riley is an Arizona native with over nine years of writing experience. From personal finance to travel to digital marketing to pop culture, she’s written about everything under the sun. When she’s not writing, she’s spending her time outside, reading, or cuddling with her two corgis.