How extra mortgage payments work
Every mortgage payment covers that month's interest first; the rest reduces your principal. When you pay extra toward principal, the balance drops faster, so the next month's interest is smaller and more of every future payment goes to principal. The effect compounds: a modest extra amount can take years off a 30-year loan.
Your required payment doesn't change. You simply reach a zero balance sooner.
How the calculator works
It first works out your regular principal-and-interest payment, then runs the loan month by month twice: once as scheduled, and once with your extra payments. Extra monthly amounts are added every month, the yearly extra once every 12 months, and the lump sum comes off the balance today.
Each month: interest = balance × r, then balance = balance + interest − (M + extra)
Worked example
A $300,000 mortgage at 6.5% over 30 years costs about $1,896 a month and about $382,600 in interest.
- $200 extra each month: the loan is paid off in about 23 years and 1 month, nearly 7 years early, saving about $103,400 in interest. The extra payments total about $55,400, so each extra dollar saves almost two dollars of interest.
- Add a $10,000 lump sum now: payoff drops to about 21 years and 5 months, and total interest saved rises to about $135,700.
Before you prepay
- Check for a prepayment penalty. Most extra principal payments are fine, but read your loan terms.
- Cover higher-interest debt first. Paying off a 22% credit card beats prepaying a 6.5% mortgage.
- Keep an emergency fund. Money paid into your home is hard to get back out quickly.
- Grab any employer retirement match first. It's usually a better return than prepaying.
- Prefer a lower payment instead? Compare with our mortgage recast calculator or the biweekly payment calculator.
Frequently asked questions
How much does an extra mortgage payment save?
It depends on your rate, balance and how early in the loan you start. On a $300,000, 30-year loan at 6.5%, an extra $200 a month pays the loan off almost 7 years early and saves about $103,000 in interest. Enter your own numbers above to see your result.
Is it better to pay extra monthly or make one big payment?
Money applied to principal sooner saves more interest, so a lump sum today beats the same total spread over years. In practice, a steady monthly extra is easier to sustain. Many people combine both: a small monthly extra plus windfalls like tax refunds or bonuses.
Will extra payments lower my monthly payment?
Usually not. Extra principal payments shorten the loan, but your required monthly payment stays the same. If you want a lower payment instead, ask your lender about a recast; our mortgage recast calculator compares the two.
How do I make sure extra money goes to principal?
Tell your servicer the extra amount is for principal, using the option on their payment page or a note with your check. Then check your next statement to confirm your principal balance fell by the extra amount.
Are there penalties for paying off a mortgage early?
Some loans have a prepayment penalty, usually for paying off the whole loan within the first few years. Small extra principal payments typically don't trigger one, but check your loan documents or ask your lender.
Sources
- What is a prepayment penalty?, Consumer Financial Protection Bureau
This calculator is for educational purposes and gives estimates based on the numbers you enter. It is not financial, tax or legal advice. Last reviewed October 2026.