At Jones Hollow Realty Group, we’re all about helping you make smart financial moves. One simple strategy can save you thousands and get you mortgage-free faster: making one extra payment per year on your 30-year mortgage. Here’s why it’s a game-changer, using an example of a $450,000 loan at 6.25% interest.
1. Pay Off Your Loan Years Sooner
Adding one extra payment each year reduces your loan’s principal faster, cutting down the time it takes to pay off your mortgage.
Example: For a $450,000, 30-year mortgage at 6.25%, your monthly payment is ~$2,771 (not including taxes or insurance). Making one extra $2,771 payment annually can shorten your loan by 5–6 years, so you’re done in ~24–25 years instead of 30.
2. Save Big on Interest
Lowering your principal early means you pay less interest over the life of the loan.
Example: That extra payment each year on your $450,000 loan could save you $60,000–$70,000 in interest, depending on when you start. That’s money back in your pocket!
3. Build Home Equity Faster
Extra payments increase your home equity (the part of your home you own outright) more quickly, giving you more financial flexibility.
Example: After just 5 years of one extra payment annually, you could have ~$20,000 more in equity than with regular payments. This can help with refinancing, selling, or tapping into home equity later.
4. Enjoy Financial Freedom Sooner
Paying off your mortgage early means no more monthly payments, freeing up cash for other goals like travel, retirement, or investments.
Example: By finishing your $450,000 loan 5–6 years early, you save ~$2,771/month sooner. Imagine what you could do with that extra cash!
How to Make It Happen
It’s easier than you think to add one extra payment a year:
- Option 1: Make one extra full payment ($2,771 in our example) once a year, like when you get a tax refund or bonus.
- Option 2: Switch to biweekly payments (~$1,385.50 every two weeks), which adds up to 13 full payments a year.
- Option 3: Add ~$231 ($2,771 ÷ 12) to your monthly payment.
Things to Keep in Mind
- Be clear with your lender: Always specify that extra payments should be applied to the principal, not interest or escrow, to maximize savings.
- No penalties: Confirm your mortgage doesn’t have prepayment penalties (most don’t).
- Budget wisely: Make sure the extra payment fits your financial plan, especially if you have higher-interest debts or other priorities.
Why It’s Worth It
For a $450,000, 30-year mortgage at 6.25%, one extra payment a year can save you $60,000–$70,000, cut 5–6 years off your loan, and boost your home equity faster. The earlier you start, the more you save!
Want to see how much you could save with your specific mortgage? Contact the Jones Hollow Realty Group team, and we’ll crunch the numbers for you. Let’s get you closer to owning your home outright!
Ready to take control of your mortgage? Reach out today!