Is It Better to Pay an Extra Mortgage Payment or to Pay Extra Each Month?

Paying off a mortgage early can leave some extra money in your pocket.

Paying Extra Adds Up

Adding any additional amount to a monthly principal will add up over time. The amount of time to pay off a mortgage will ultimately depend on how much extra you intend to contribute to the principal balance each month. Making additional payments each month will account for more than 12 additional payments per year.

An Extra Payment Per Year

Making a full extra payment each year can cut down the time it takes to pay off a 30-year mortgage by 10 years. All of this amount would go to the principal balance, and would decrease the amount of the loan year over year.

Bottom Line

Ultimately, paying more monthly on the principal that would be equal to or greater than one full mortgage payment each year makes the most sense in paying off a mortgage quickly. How much extra a borrower is willing to contribute makes the most impact.

References

• Wise Bread: What's Faster for Mortgage Payoff: $100/month extra or 1 Payment/Year Extra?
• How to Buy a House: Paying off a 30-Year Mortgage in 15 Years
• MSN Money: Don't Rush to Pay off That Mortgage