How it works
The calculator first finds your regular principal-and-interest payment with the standard formula, M = P × r(1 + r)n / ((1 + r)n − 1). Then it runs the loan month by month:
interest = balance × r
balance = balance + interest − (M + extra monthly + extra yearly in months 12, 24, … + one-time in its month)
The loop stops when the balance reaches zero. Months saved is the original number of payments minus the new number. Interest saved is the original total interest minus the new total interest. Your required payment never changes. Extra payments simply cut the balance faster, so less interest builds up every month after that.
The results assume your lender applies every extra dollar to principal right away and charges no prepayment penalty. Taxes, insurance and PMI are not included.
Worked examples
$300,000 at 6.5% for 30 years, plus $200 a month
Regular payment: $1,896.20. Without extra payments the loan takes 360 months and costs $382,633.47 in interest. With $200.00 extra each month it is paid off in 277 months (23 years 1 months), saving $103,448.79 and 6 years 11 months.
Same loan, one extra payment a year vs. a $10,000 one-time payment
Adding one extra full payment ($1,896.20) every 12th month pays the loan off in 292 months (24 years 4 months) and saves $83,984.52. A single $10,000.00 payment in month 1 cuts 33 months and saves $53,601.51.
$250,000 at 7% for 30 years: $100 monthly + $1,000 yearly + $5,000 in month 24
Combining all three extra payments pays the loan off in 259 months (21 years 7 months) instead of 360, saving $117,203.49 in interest.
Why extra payments save so much
Mortgage interest is charged on the remaining balance. Early in a loan most of each payment is interest. On a $300,000.00 loan at 6.5%, the first payment of $1,896.20 includes $1,625.00 of interest and only $271.20 of principal. Every extra dollar of principal you pay early avoids interest on that dollar for the rest of the loan. That is why the same extra payment saves far more in year 1 than in year 20. In our example, a $10,000.00 lump sum paid in month 1 saves $53,601.51, while the same amount paid in month 120 saves $24,871.14.
Popular strategies
- Round up. Round your payment up to the next $100 or $500. Small, painless and effective.
- One extra payment a year. Adding one full payment each year, for example from a tax refund or bonus, typically takes about 5–6 years off a 30-year loan.
- Biweekly payments. Paying half your payment every two weeks adds up to 26 half-payments, or 13 full payments, a year. That is the same as one extra payment annually. Check whether your servicer charges for biweekly plans; you can get the same effect for free by adding 1/12 of a payment each month.
- Windfalls. Put part of an inheritance, bonus or home-sale proceeds toward principal as a one-time payment.
- Recast. Some lenders will re-amortize (recast) the loan after a large lump-sum payment. This lowers your required payment instead of shortening the term, usually for a small fee.
Should you prepay your mortgage?
Paying extra principal earns a guaranteed, risk-free return equal to your mortgage rate. Before you prepay, it usually makes sense to:
- Build an emergency fund of 3–6 months of expenses. Home equity is hard to get back without borrowing.
- Capture any employer 401(k) match. See the 401(k) calculator.
- Pay off higher-rate debt first, such as credit cards, car loans or private student loans.
With a low mortgage rate, say 3%, investing may be expected to earn more over the long run, though with risk. With a rate of 6%–7% or more, prepaying is very competitive. Many people do both.
Make sure extra payments go to principal
When you send extra money, label it “apply to principal” online or on your payment coupon. Check your next statement to confirm the balance dropped by the full amount. Some servicers otherwise hold extra money as an advance on next month's payment, which does not save interest. Most modern mortgages have no prepayment penalty, but read your note to be sure.
Extra payments vs. refinancing to a shorter term
Refinancing from a 30-year to a 15-year loan usually gets you a lower rate, but it locks you into a much higher required payment and costs thousands in closing costs. Paying extra on your existing loan gives you most of the same interest savings with full flexibility. If money gets tight, you simply stop paying extra. Refinancing makes more sense when you can get a meaningfully lower rate. Compare both with the refinance calculator.
Keep in mind that extra payments don't reduce your required payment, and they don't let you skip a payment later. Money you send in is locked in your home until you sell, refinance or borrow against it. Prepay with money you won't need soon.
Frequently asked questions
How much does paying $100 extra on a mortgage save?
It depends on the balance, rate and timing, but on a typical 30-year loan, $100 a month from the start can cut several years and tens of thousands of dollars of interest. Enter your loan above to see the exact figures.
Is it better to pay extra monthly or once a year?
Paying earlier saves slightly more interest, so $100 a month beats $1,200 at the end of each year by a small margin. The difference is modest. Choose whatever you will stick with.
Do extra payments lower my monthly payment?
No. On a standard mortgage your required payment stays the same and the loan ends sooner. To lower the payment you would need to recast or refinance the loan.
What is the best time to make extra mortgage payments?
As early in the loan as possible, because each dollar of principal paid early avoids interest for more years. A one-time payment in year 1 saves much more than the same payment in year 20.
Are there penalties for paying off a mortgage early?
Most U.S. mortgages originated in recent years have no prepayment penalty, and federal rules restrict them on many loans. Check your promissory note or ask your servicer.
Should I pay off my mortgage early or invest?
Prepaying earns a guaranteed return equal to your mortgage rate. Investing may earn more over time but carries risk. Many people first build an emergency fund, capture any employer match and pay off higher-rate debt, then split extra money between the two.
How do biweekly payments work?
You pay half your monthly payment every two weeks. With 52 weeks in a year that makes 26 half-payments, or 13 full payments, which is one extra payment a year. You can mimic it by adding 1/12 of a payment each month in the extra monthly field.