Small extra payments, big savings
Every dollar you add to a mortgage payment goes directly to principal. That dollar then stops generating interest for the rest of the loan. Over decades, a modest extra amount each month can cut years off the loan and save tens of thousands of dollars. This calculator shows exactly how much.
How it is calculated
- Your current payment comes from the remaining balance, rate and years left.
- With an extra amount e, the number of payments needed becomes n = −ln(1 − r × balance ÷ (payment + e)) ÷ ln(1 + r), with r the monthly rate.
- Interest saved = remaining interest without the extra − remaining interest with it.
Worked example: $300 more per month
You owe $300,000 at 6.5% with 27 years left. Your principal-and-interest payment is $1,966.66.
- Paying $2,266.66 instead pays the loan off in 19.5 years.
- That is 90 months (7.5 years) sooner.
- Remaining interest drops from $337,199 to $230,400: you save $106,800.
How much each extra amount saves
| Extra per month | Months saved | Interest saved | New payoff time |
|---|---|---|---|
| $0 | 0 | $0 | 27.0 years |
| $100 | 38 | $46,133 | 23.8 years |
| $200 | 67 | $80,367 | 21.4 years |
| $300 | 90 | $106,800 | 19.5 years |
| $500 | 124 | $143,866 | 16.7 years |
| $1,000 | 177 | $201,100 | 12.2 years |
The first dollars save the most per dollar: $100 a month already cuts more than three years.
Ways to prepay
- Extra each month: tell your servicer to apply it to principal, not to the next payment.
- Biweekly payments: paying half the monthly amount every two weeks adds one full payment a year.
- Lump sums: a bonus or tax refund applied to principal works the same way, starting from that date.
- Recasting: after a large lump sum, some lenders recalculate a lower monthly payment for a small fee while keeping the term.
Most US mortgages issued since 2014 have no prepayment penalty, but check your note, especially for non-qualified or older loans.
Should you prepay or invest?
Prepaying earns a guaranteed return equal to your mortgage rate. At 6.5%, that is hard to beat safely. At 3%, investing the same money may grow faster over time, though with risk. Before prepaying, make sure you have an emergency fund, capture your full 401(k) match and pay off any higher-rate debt such as credit cards.