Should you make one extra mortgage payment per year?

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A mortgage is a big commitment. Most home loans last 30 years, and can easily run to several thousand dollars per month. Many homeowners look for ways to save money on interest or pay off their home more quickly.

One way to pay off your mortgage ahead of schedule is to make extra payments toward your debt. Some people choose to add one extra payment each year. This is a long-term strategy, but it can speed up the amortization of your loan, saving you money on interest and getting you out of debt more quickly.

How much will making an extra mortgage payment save me?

Making extra mortgage payments helps you pay your loan off more quickly and reduces your loan’s principal. This speeds up the amortization of your loan, the process through which your loan’s principal drops and more of your payments go toward paying down the loan’s balance rather than covering interest.

How much you can save will depend on when you start making extra payments and the interest rate of your loan. An amortization calculator can help you figure out exactly how much you’ll save.

Here’s an example to illustrate how extra payments save you money.

In April 2026, Jocelyn and Irma get a 30-year fixed mortgage on their townhouse. The loan starts with a balance of $350,000 and a principal and interest payment (not counting taxes or insurance) of has with a monthly payment of $2,241.09. The loan’s interest rate is 6.625% (6.893% APR).¹

Together, they agree to make almost one extra payment per year, applied directly to the balance. Let’s take a side-by-side look at what they would pay in interest and their total investment in the loan.

How many years does making extra payments take off my loan?

The amount of time that making extra payments takes off your loan depends on a few factors, including the size of the payments, the size of your loan, when you begin making extra payments, and the loan’s interest rate.

In general, the earlier you make your extra payments, the more you pay, and the higher you’re loan’s interest rate, the greater the impact of making additional payments.

Consider Jocelyn and Irma’s situation. They decided to round down their monthly mortgage payment to $2,241 and make that their 13th payment for the year. Without that 13th payment, they would finish paying their mortgage in June 2050 versus March 2056. That’s 5 years, 9 months ahead of their amortization schedule! 

Why making extra mortgage payments works

Making extra mortgage payments works because of how interest is calculated.

Each month, interest accrues on your loan based on its remaining balance. When you make your monthly payment, you pay off all the accrued interest plus a portion of the loan’s principal. As you pay down the principal of your loan, less interest accrues each month, meaning more of your payment goes toward reducing the balance of your loan.

When you make an extra payment toward your loan, it immediately lowers your principal balance. That means that each month, less interest will accrue than would have if you’d followed the typical payment schedule. That means each subsequent payment reduces your principal by a greater amount than it would have.

Because you keep making the same monthly payment, but those payments reduce the loan’s balance by more than expected by the minimum payment schedule, you wind up paying the loan off more quickly and paying less in interest.

How to set up extra payments

If you want to make extra payments on your loan, it’s important to reach out to your lender. Each lender’s process is slightly different, so make sure to follow whatever steps your lender lays out.

When talking to your lender, make sure to be explicit that you want the extra payment to be immediately applied to the loan principal rather than treated like a normal monthly payment.

Once you understand the process, consider automating or scheduling extra payments in advance to help the process go more smoothly.

Other methods to make extra payments

There are a few strategies you can use to make extra payments toward your mortgage.

• Lump-sum annual payments: This involves making one extra payment per year for whatever amount you can afford.
• Biweekly payments: Some people choose to pay their mortgage every other week, sending half of a typical monthly payment. Because there are 52 weeks in a year, this results in 26 half payments, equivalent to 13 monthly payments, so you effectively make one extra payment per year.
• Adding more to the monthly payments: You can add additional money to your normal monthly payments and have that money go toward your loan principal. For example, if your monthly payment is $2,183.55, paying an extra would be the equivalent of a little more than one extra mortgage payment each year.
• Principal-only payments: If you find yourself with extra money sitting around, you can make an unscheduled extra payment toward principal.

Pros and cons of making extra mortgage payments

Before you start making additional payments toward your mortgage, consider the pros and cons of doing so.

Pros

There are a few good reasons to make extra mortgage payments.

• Shortens your loan’s term: Extra payments reduce your loan term, meaning you can pay it off potentially years early.
• Reduces the total interest paid: Extra mortgage payments let you pay the loan off more quickly and reduce the interest that accrues each month, saving you money.
• Builds equity fast: Each additional principal payment lowers the balance of your loan, which can quickly increase your home equity.
• Potential credit improvements: Paying down your debt can help improve your credit score.

Cons

Making extra mortgage payments isn’t right for everyone, so consider these drawbacks before you commit to extra payments.

• Prepayment penalty: Some lenders include a prepayment penalty in their loans, so you may have to pay a fee if you pay the loan off ahead of schedule.
• Opportunity costs: The money you spend on extra payments is money you can’t use for other purposes, so you may miss out on opportunities to make good investments or use the cash for other purposes.
• Reduced cash flow: If you have a tight monthly budget, you may not want to make extra payments and instead focus on having the flexibility to deal with financial emergencies.

When to consider making extra payments

Making extra mortgage payments can be a good idea in a few scenarios.

For example, a homeowner who is close to retirement might consider making extra payments toward their mortgage. Retirees usually have lower incomes than people who are still working, and mortgage payments are typically a significant portion of people’s monthly budget.

Extra payments can help retirees pay off their loan more quickly, freeing up space in their budget, or boost their equity, giving them a chance to refinance to a lower payment.

People who plan to own their home for the long term are also good candidates for making extra payments. Paying off a mortgage takes a long time, and extra payments have a bigger impact the sooner you start making them. If you’re going to keep your home for a long time, you can get big benefits by making additional payments.

If you’re thinking about making extra mortgage payments, take a close look at your finances and consider consulting a financial advisor for advice.

FAQ about extra loan payments

Before you start making extra payments, it’s important to understand how they work and will affect your loan.

Does making one extra payment per year make a difference?

Yes, one extra payment per year can make a big difference. It varies based on the loan amount, but it's not unusual to save up to tens of thousands of dollars in interest. Moreover, multiple years can be shaved off the life of the loan.

Should I invest in the stock market or pay down my mortgage?

The decision between investing and paying down your mortgage is all about your mortgage rate and appetite for risk. The higher your loan’s rate, the greater the returns your investments would need to produce to be better than extra payments.

If you have a low mortgage rate or are willing to take some risk, investing can be better. Risk-averse people and those with higher rates should pay down their loans.

How much is too much regarding mortgage payments?

There’s no single answer to how much is too much when making extra mortgage payments. Analyze your budget and make sure you don’t over-extend yourself, but the more you can pay, the faster you can pay off your debt.

What is the 1/12 mortgage strategy?

The 1/12 mortgage strategy refers to a method of making extra payments. To use the strategy, you save 1/12 of your mortgage payment each month in a separate account. Then, at the end of the 12 months, you send that money to your lender as an extra payment, meaning you make one extra payment each year.

The bottom line: Choose the best strategy to make extra mortgage payments

Extra mortgage payments can help you save money on interest and pay your loan off more quickly. Take a close look at your budget and, if you can afford it, consider making additional payments so you can build equity more quickly and save money.

If you want to see how much money you can save by making extra payments on your mortgage, use the loan payoff calculator from Rocket Mortgage. And if you’re looking to refinance your existing loan, get in touch with one of our Home Loan Experts.

¹ The payment on a $350,000 30-year fixed-rate loan at 6.625% is $2,241.09. The annual percentage rate (APR) is 6.893% and the loan-to-value ratio (LTV) is 80% for the cost of 1.75 points ($6,125) due at closing. One point is equal to one percent of the loan amount. Payment does not include taxes and insurance premiums. The actual payment amount will be greater. Rates shown valid on publication date of April 15, 2026. Some state and county maximum loan amount restrictions may apply.