"Add One Month" Mortgage Payoff Strategy

This strategy turns a 30 year mortgage into a 15 year mortgage by gradually increasing the extra principal paid each month.

11/29/20233 min read

mortgage Scrabble tiles
mortgage Scrabble tiles

Imagine that you just bought a home utilizing a 30-year mortgage, and you decide you want to pay it off in half the time, 15 years. Well, there are countless ways to achieve that goal, and I’m going to outline one that is super simple and makes sense for one very important reason – when we purchase a home, money is usually tight initially. It takes time to get accustomed to the costs of home ownership. This method allows you to achieve this goal by increasing the amount of extra principal you pay each month. Hopefully, your income increases over that 15-year period so keeping up with the higher “extra” amount becomes easier.

Below is a sample amortization schedule for a 30-year mortgage. The loan amount is $203,920 at a fixed rate of 6.75%. Each month, for 360 months, the principal and interest portion of your mortgage will remain the same at $1,322.62. The only thing that changes each month is the breakout between principal and interest. As time goes on and the balance falls, the amount of each payment that is applied to the principal increases.

Let’s get back to the “Add One Month” strategy of turning a 30-year mortgage into a 15-year mortgage. To utilize this strategy, all you must do is add the next month’s principal amount to the current month’s payment as extra principal. For example, for the first payment, you will add $176.56 to your mortgage payment as “extra principal.” Then, in the second month, you will add the following month’s (month 3’s) principal amount to your payment as an extra principal payment. In other words, you will add $177.55 to month two’s payment (For the sake of accuracy, if this was a live spreadsheet and you entered $176.56 as extra principal into the extra principal section of payment one, the principal in month three changes to $178.55. Why? Because by making an extra principal payment in month one, you increase the amount that is applied to principal in future months.)

When you follow this method, after 180 payments your balance is zero. In month one, the amount of extra principal you pay is just $176.56, but by month 180, the amount of extra principal you pay is $1,325.14. While that's a big difference, keep in mind that the extra principal payment grows gradually each month over the 180-month period. The idea behind this strategy is that over a 15-year period, your income should grow accordingly, and you will be better able to handle the larger payments as time goes on.

An amortization table is relatively easy to build and will help you reach your goals. However, if spreadsheets are not your thing and you’d like someone to construct a personalized spreadsheet for you and offer you other strategies to reach your mortgage payoff goal, contact mortgagebasher.com. We will be your teacher and coach and provide all the guidance you need!

Pmt # Payment Beg Balance Principal Interest Extra Principal Balance

1 11/01/23 $1,322.62 203,920.00 175.57 1,147.05 203,744.43

2 12/01/23 $1,322.62 203,744.43 176.56 1,146.06 203,567.87

3 01/01/24 $1,322.62 203,567.87 177.55 1,145.07 203,390.32

4 02/01/24 $1,322.62 203,390.32 178.55 1,144.07 203,211.77

5 03/01/24 $1,322.62 203,211.77 179.56 1,143.07 203,032.22

6 04/01/24 $1,322.62 203,032.22 180.56 1,142.06 202,851.66

7 05/01/24 $1,322.62 202,851.66 181.58 1,141.04 202,670.08

8 06/01/24 $1,322.62 202,670.08 182.60 1,140.02 202,487.47

9 07/01/24 $1,322.62 202,487.47 183.63 1,138.99 202,303.85

10 08/01/24 $1,322.62 202,303.85 184.66 1,137.96 202,119.18