Is It Better to Make a Lump-Sum Payment or Pay Extra Monthly?
Free calculators for everyone — the 5–7 Year Alternative serves USA residents only.
You've got extra money for the mortgage. Should you dribble it out monthly or drop it once a year? The answer depends on how much — and the math favors earlier over later.
The head-to-head
On a $500,000 loan at 7%: sending $5,000 once a year to principal pays the loan off in about 21.9 years and saves roughly $217,400 in interest. Sending $500 every month ($6,000/year) finishes in about 20.6 years and saves roughly $252,500. The monthly approach wins — but note it also puts in $1,000 more per year.
Why timing matters
Every dollar of extra principal starts saving you interest the moment it's applied. Money sent in January saves eleven more months of interest than money sent in December. That's the entire edge of monthly over yearly: earlier dollars work longer.
The practical answer
Don't let the perfect schedule block the good habit. If your extra money arrives as a year-end bonus, send it when it arrives — a lump sum in hand beats a monthly plan you never start. If you have steady monthly surplus, automate a monthly extra-principal payment and forget about it.
Model both on your loan with our lump-sum calculator and monthly extra calculator — or see if you qualify for a payoff plan built around your actual cash flow.
Calculations are illustrative only, based on the assumptions shown. Not financial advice, not a promise of savings or payoff time, and not a loan quote.
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