Mortgage Extra Payment Calculator

What a little extra principal really buys you

An extra payment on a mortgage does something that feels almost unfair to the bank. Every dollar you send beyond the scheduled payment goes straight to principal, and because interest is charged on the remaining balance, knocking down that balance early erases years of future interest. The effect compounds in your favor. This calculator amortizes your loan month by month, first on the normal schedule and then with your extra payment added on top, and reports how many months you shave off and how much interest you never have to pay.

The reason a modest extra works so hard is timing. In the early years of a mortgage, most of each payment is interest and only a sliver is principal. An extra payment reverses that ratio for the dollars you add, since they all attack principal. That is why front loading extra payments matters more than back loading them.

Where every extra dollar goes

Each month the tool charges interest on the outstanding balance at one twelfth of your annual rate, then applies your regular principal and interest payment plus the extra amount. Whatever is left after covering that month's interest reduces the balance. As the balance falls, the interest portion falls with it, so a larger and larger share of your fixed payment turns into principal. The loan ends the month the balance hits zero, which with extra payments comes well before the original term.

Adding $300 a month to a $300,000 loan

Take a $300,000 balance at 6.5 percent with 30 years remaining. The scheduled principal and interest payment is about $1,896 a month, and left alone the loan would cost roughly $382,633 in total interest over 360 months. Now add $300 a month. The payoff drops to 250 months, 9 years and 2 months sooner, and the interest you avoid comes to about $135,115. You are paying $300 more a month and getting back more than a third of the loan's lifetime interest.

The chart compares total interest paid with and without the extra payment.

When you should invest the money instead

Prepaying a mortgage is a guaranteed return equal to your interest rate, and that is the right way to think about it. At 6.5 percent, every extra dollar earns a risk free, tax adjusted 6.5 percent. The question is whether you have a better use for the cash. If your rate is low, say a 3 or 4 percent mortgage from a few years ago, the expected return on a diversified stock portfolio is higher, so investing the extra usually wins on math. At today's higher rates the case for prepaying is much stronger. Either way, a few things come first: build an emergency fund, capture every dollar of employer 401(k) match, and clear high interest credit card debt before you accelerate a mortgage.

A practical tip drawn from years of watching this go wrong: when you send an extra payment, tell your servicer in writing to apply it to principal. Some lenders default to treating extra money as a prepayment of the next month's bill, which does nothing to shorten the loan. Check the next statement to confirm the balance dropped by the full extra amount.

Is it better to make one extra payment a year or a little each month?

A little each month wins by a small margin because the principal comes down sooner, so you save a bit more interest across the year. The difference is modest though. What matters far more is consistency. If a single annual lump sum, timed to a bonus or a tax refund, is the only way you will actually do it, that is better than an aspirational monthly plan you abandon. Pick the cadence you will stick to.

Does prepaying lower my monthly payment?

No. Extra payments shorten the loan but leave your required monthly payment unchanged, since the amortization schedule stays fixed. You simply reach a zero balance sooner. If you want a lower monthly payment from a lump sum instead, you are looking for a recast, where the servicer re amortizes the reduced balance over the remaining term. That is a different strategy with a different goal.