How Much Does One Extra Mortgage Payment Save?

This is the most-searched mortgage question with the least consistent answer, because "one extra payment" describes three different things:

All three are on our standard example: $400,000, 6.25%, 30-year fixed, $2,462.87 monthly payment, $486,632 total interest if you never pay extra.

The advice you have heard — "just make one extra payment a year and you'll pay off years early" — refers to the first two rows. It is true, and the effect is large. A single one-off payment is a much smaller lever.

Over the life of the loan you contribute about $60,100 in extra payments and remove $107,025 of interest — a return of roughly $1.78 for every extra dollar, guaranteed, with no market risk.

Because it does not behave like one payment. It behaves like a permanent reduction in your balance that compounds for the rest of the loan.

Your interest each month is charged on whatever you currently owe:

A normal payment of $2,462.87 in month one splits like this:

• $2,083.33 to interest (84.6% of it)
• $379.54 to principal (15.4%)

An extra payment has no interest attached. All of it lands on the balance. So $2,462.87 of extra money reduces your debt by about 6.5× more than the same amount paid as a scheduled payment does in year one.

And it keeps working. After twelve months of adding $205.24, your balance is $392,778 instead of $395,313 — $2,535 lower, slightly more than the $2,462.87 you contributed, because the reduced balance has already begun suppressing your interest charges. That gap widens every year for the rest of the loan.

Spreading wins, modestly but consistently:

The reason is timing: money that reaches your principal in January suppresses eleven months of interest that year, while money arriving in December suppresses none of it. Nearly $4,000 for changing when you pay the same total.

That said, an annual lump you will actually make beats a monthly amount you abandon in March. If your extra money genuinely arrives as a bonus or refund, take the annual version and the $103,029.

Here is the same single extra payment of $2,462.87, made at different points in the loan:

The identical payment is worth six times more in year one than in year twenty. Nothing about the payment changed — only the number of future months it gets to work on. This is the strongest argument for starting small immediately rather than waiting until you can afford more.

Biweekly programs are the same strategy wearing a disguise. You pay half your monthly payment every two weeks; there are 26 two-week periods in a year, so you make 26 half-payments — 13 full payments instead of 12.

The result is the "one extra payment a year" figure: $107,025 and 5 years 7 months. The appeal is behavioural, not mathematical — it lines up with a biweekly paycheck and requires no ongoing decision.

• Label it "principal only." An unlabelled overpayment is often applied to next month's bill or held in suspense — neither reduces your balance.
• Divide correctly. One extra payment a year spread monthly is your payment ÷ 12 ($205.24 here), not your payment ÷ 11 or a round $200.
• Use principal and interest only. If your payment includes escrow for taxes and insurance, base the 1/12 calculation on the P&I portion. Extra escrow does not touch your loan.
• Confirm on the next statement. The balance should be lower than the schedule says.