Extra Mortgage Payments: Monthly or Yearly?

Making even the smallest extra payments on a mortgage can reduce the life of a loan, potentially by a significant amount. But how often should extra payments be made? There are two main options for consideration.  

Loan Amortization Schedule: What is it? 

A loan amortization schedule is a complete table of loan payments. It will show the amount of principal and interest that make up each monthly payment until the loan is fully repaid. Getting ahead on a loan amortization schedule equates to building home equity. To do this, you will need to consider paying more than your normal mortgage payment. We’ve made a loan amortization calculator so you can determine the number of your monthly repayments.    

Benefits of Making Extra Mortgage Payments  

There are many benefits of making extra mortgage payments, including:
  • Saving on interest: Extra payments = less in overall interest you pay on the whole life of the loan.
  • Eliminating PMI: If you are unable to put down a 20% down payment, you are required to pay Private Mortgage Insurance (PMI) as part of your monthly payment. Making extra payments will help you achieve an 80% loan-to-value ratio sooner, which means you can eliminate PMI and lower your payment!
  • Shortening the loan term: Making more frequent payments than required will speed up the clock and help you pay off your home in less than 30 years!

Should I Pay Extra Monthly or Yearly? 

While any extra payment towards your mortgage will push you farther along your loan amortization schedule, the two main options are to either put more money towards your monthly mortgage payment or to make yearly lump sum payments. If you choose to pay extra on your monthly payment, you are paying a little more principal and a little less interest than you did on the previous payment, meaning you could pay off the loan slightly faster in the long run. However, it may not be in your best financial interest to tie up additional monthly income on a regular basis.  In this case, you may prefer to use bonuses or other “extra” income as a yearly lump sum payment. The best way to make additional payments on your mortgage is the way that makes the most sense to you and your financial goals.   

Consistency is Key 

Whether you choose to pay a little more each month or make one yearly lump payment, consistency will bring more success. Putting any extra cash towards your payments, especially in the beginning, will push you further along the amortization schedule and shorten the life of your loan. Establishing a strategy for your additional payments and then sticking to it is more important than the timing. At Spire Financial, we will help tailor your loan options to be meet your financial goals and our loan experts are here to guide you through the home purchase or refinance process. Contact us today to start the mortgage pre-approval process.

A Lending Hand for Financing Home Mortgages

Spire Financial (A Division of V.I.P. Mortgage, Inc.) brings lending expertise to you. All of our loan officers offer personalized communication for every client, guiding them through the process. We can show you ways to maximize your finances and unlock future opportunities. Spire Financial keeps you in control of refinancing, debt consolidation, and home equity. Together, we can achieve your financial goals.



V.I.P. Mortgage, Inc. DBA Spire Financial does Business in Accordance with Federal Fair Lending Laws. NMLS ID 145502. For state specific licensing, visit www.vipmtginc.com/national-licenses/. V.I.P. Mortgage, Inc. is not acting on behalf of or at the direction of the FHA/HUD or the Federal Government. This product or service has not been approved or endorsed by any governmental agency, and this offer is not being made by any agency of the government. V.I.P. Mortgage, Inc. is approved to participate in FHA programs but the products and services performed by V.I.P. Mortgage, Inc. are not coming directly from HUD or FHA. Information, rates, and programs are subject to change without notice. All products are subject to credit and property approval. Not all products are available in all states or for all loan amounts. Other restrictions may apply. This is not an offer to enter into an agreement. Not all customers will qualify.

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