U.S. MORTGAGE GUIDE

Should you make a lump-sum mortgage payment?

A bonus, tax refund or sale of an asset can create an opportunity to reduce mortgage principal in one step. Paying earlier usually leaves less principal generating future interest, but a lump sum also reduces your available cash.

Start with the balance, not the original loan

Use the balance currently outstanding and the number of payments already made. A payoff calculator can estimate how much interest remains under the original schedule and what changes after the proposed payment.

Protect liquidity first

Keep an emergency reserve and consider higher-cost debt before committing cash to a mortgage. A mortgage payment normally cannot be withdrawn later without selling, refinancing or using another borrowing option.