One Extra Mortgage Payment a Year: How Much Time and Interest It Saves
One extra payment a year can take about six years and $98,500 of interest off a $300,000 loan at 7%. Here are three easy ways to do it.
- Making one extra mortgage payment a year on a $300,000, 30-year loan at 7% pays it off about 6 years early and saves about $98,500 in interest.
- That extra payment is $1,996, the same as one normal monthly payment.
- Splitting it into twelve smaller pieces (about $166 a month) saves a little more: about 6 years 3 months and $102,400.
- Thirteen payments a year is also what a true biweekly plan does, without any special program or fee.
“Make one extra payment a year” is one of the most popular mortgage tips out there, and for good reason. It’s simple, it doesn’t need a new loan, and the results are surprisingly big. Here’s exactly how much it saves, the easiest ways to do it, and a few traps to avoid.
How much one extra payment a year saves
These examples use a 30-year fixed loan at 7%, starting from day one, with the extra payment made at the end of each year.
| Loan | Monthly payment | Extra per year | Paid off early by | Interest saved |
|---|---|---|---|---|
| $300,000 | $1,996 | $1,996 | 6 years | $98,545 |
| $400,000 | $2,661 | $2,661 | 6 years | $131,393 |
A 30-year loan becomes roughly a 24-year loan. Want to try your own balance, rate and years left? Use the extra payment calculator and enter one-twelfth of your payment as the monthly extra.
Three easy ways to make the 13th payment
| Method | How it works | $300,000 at 7%: savings |
|---|---|---|
| Once a year | Send one full extra payment, for example from a tax refund or bonus | 6 yrs, $98,545 |
| 1/12 each month | Add about $166 to every monthly payment | 6 yrs 3 mos, $102,424 |
| Biweekly (half every two weeks) | 26 half-payments = 13 full payments a year | Close to the monthly method, if your servicer applies each half right away |
The 1/12 method wins slightly because the balance starts dropping right away instead of waiting until December. It also feels easier on the budget for many people, since $166 a month is less painful than one $2,000 check.
Make sure the extra money hits principal
An extra payment only saves interest if it lowers your balance. When you send it:
- Use the “additional principal” box in your servicer’s online portal, or write “apply to principal” on the check.
- Don’t just send a double payment with no note. Some servicers treat it as next month’s payment paid early.
- Check your next statement to confirm the principal dropped by the extra amount.
Also check your loan documents for a prepayment penalty. They’re rare on today’s home loans, but here’s what the federal rules allow.
Is one extra payment a year the right move for you?
It’s a great fit if you have a steady budget, an emergency fund, and no high-interest debt. Before you start, ask yourself:
- Is there credit card debt to pay off first? It almost always costs more than your mortgage.
- Do you have three to six months of expenses saved? Home equity isn’t easy to get back out in an emergency.
- Would the money do more invested? See pay off your mortgage or invest?
If the extra payment is bigger than a normal payment, like an inheritance or bonus, compare it with smaller monthly amounts in lump sum vs. monthly extra payments. For more ways to get debt-free sooner, read how to pay off your mortgage early.
FAQ
How much does one extra mortgage payment a year save?
On a $300,000, 30-year loan at 7%, about six years and $98,500 in interest. The bigger the loan and the higher the rate, the more it saves.
Does one extra payment a year really take 6 years off?
At a rate around 7%, yes, roughly. At lower rates it’s a bit less: about 5 years 3 months at 6%, 4 years 7 months at 5%, and 4 years at 4% on a $300,000, 30-year loan.
Is it better to make the extra payment in January or December?
Earlier is slightly better because the balance drops sooner, but the difference over one year is small. Being consistent matters more than timing.
Can I make the extra payment with a credit card?
Most servicers don’t allow it, and fees or card interest would usually cancel out the savings. Use your checking account.
Sources: Consumer Financial Protection Bureau (crediting of payments and prepayment rules). All payment, interest and time-saved figures computed by Keys & Coffee using standard amortization math. This article is general education, not financial advice. Keys & Coffee is not a lender.
Written by
Shivam Kaushik· IMSHIVA
Founder & Director, QuibbleTech Solutions Pvt Ltd · Editor, Keys & Coffee
Shivam Kaushik is the founder of QuibbleTech Solutions Pvt Ltd and the editor of Keys & Coffee. He is not a licensed loan officer or financial adviser. Every guide here is written in plain English and checked against official sources such as the CFPB, HUD, Fannie Mae, Freddie Mac and the Federal Reserve. For advice on your own loan, talk to a licensed lender.
Keys & Coffee is an independent education site. We are not a lender or mortgage broker, we do not take loan applications or payments, and nothing here is financial advice. This site is not affiliated with Axia Home Loans, Axia Financial, LLC, or Planet Home Lending. Rates and rules change often — always confirm details with a licensed loan officer and check any lender on the NMLS Consumer Access site.
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