How much does an extra payment save on a mortgage?
On this example loan, the required payment is $1,891 and $100 extra a month saves $38,337 and cuts 2 yrs 10 mos. Each extra dollar goes straight to principal, so it stops that dollar from being charged interest for the rest of the loan.
| Extra each month | Paid off in | Time saved | Interest saved |
|---|---|---|---|
| $50 | 23 yrs 6 mos | 1 yr 6 mos | $20,707 |
| $100 | 22 yrs 2 mos | 2 yrs 10 mos | $38,337 |
| $200 | 20 yrs | 5 yrs | $66,894 |
| $300 | 18 yrs 3 mos | 6 yrs 9 mos | $89,151 |
| $500 | 15 yrs 7 mos | 9 yrs 5 mos | $121,848 |
| $1,000 | 11 yrs 6 mos | 13 yrs 6 mos | $169,176 |
The first dollars do the most work. The first $100 saves $38,337, but at $1,000 a month each $100 saves about $16,918, because the loan is gone sooner and there's less interest left to avoid. A small amount you can keep up may be worth more to you than a large amount you drop after a year.
How to use your current balance instead of the original loan
Enter what you owe today, not what you first borrowed. Your monthly statement shows the balance and rate. The time left comes from your loan documents, and it's shorter than your original term if you've made payments for years.
The field to watch is Principal & interest payment. Leave it at $0 and the calculator works out the payment from your balance, rate, and time left. If you've already paid extra in the past, that figure will be lower than what your statement requires, so type your real payment in instead. Leave out escrow, since money for taxes and insurance never reduces the loan. The trap is typing your full statement payment here: it makes the loan look like it pays off years early when nothing has changed.
How much extra to pay off your mortgage in 10, 15, or 20 years
To clear this example loan in 15 years, add about $549 a month. Choose Hit a payoff date in the calculator to solve this for your own loan.
| Pay off in | Extra each month | Total a month | Interest saved |
|---|---|---|---|
| 10 years | $1,289 | $3,180 | $185,664 |
| 15 years | $549 | $2,440 | $128,195 |
| 20 years | $198 | $2,089 | $66,393 |
Biweekly, one extra payment, or a lump sum: which saves more?
Timing decides this more than the method. A $10,000 lump sum today saves $37,108, while the same $10,000 ten years from now saves $15,423. Money sent early has more years left to avoid interest.
| Plan | Paid off in | Interest saved |
|---|---|---|
| Biweekly (26 half-payments a year) | 20 yrs 10 mos | $55,695 |
| One extra payment of $1,891 each year | 21 yrs | $53,227 |
| $10,000 once, today | 23 yrs | $37,108 |
| $10,000 once, in year 11 | 23 yrs 11 mos | $15,423 |
Biweekly works because 26 half-payments equal 13 full payments, and you can get nearly the same result by adding one extra payment a year yourself. Be wary of paying a company to do it. In 2015 the Consumer Financial Protection Bureau (CFPB) sued one biweekly program operator, alleging it knew consumers would pay more in fees than they saved in interest for the first several years. Ask your servicer whether there's a fee and when it applies the money.
Should you pay off the mortgage or invest the extra money?
Compare your mortgage rate with what you honestly expect to earn after tax. Prepaying a 6.5% loan earns exactly 6.5% with no risk, and investing has to beat that, with returns that aren't promised and can be negative. The table compares $200 a month invested for the whole 25 years against prepaying, then investing your freed-up $2,091 a month once the loan is gone.
| Return you assume | Invest $200 a month | Prepay, then invest | Ahead |
|---|---|---|---|
| 4% | $102,826 | $138,603 | Prepaying |
| 5% | $119,102 | $142,172 | Prepaying |
| 6% | $138,599 | $145,860 | Prepaying |
| 6.5% | $149,767 | $147,750 | About even |
| 7% | $162,014 | $149,671 | Investing |
| 8% | $190,205 | $153,609 | Investing |
When the return matches your mortgage rate, the two come out about even. Two more things can tilt the choice. If you itemize, part of your mortgage interest may be deductible, which lowers the real rate you're paying off. And a home isn't easy to spend. The CFPB warns that money put into a home isn't easy to get back out, so keep an emergency fund and clear costlier debt first. Our debt payoff calculator can compare those balances.
Check these before you send extra money
- Ask for it to go to principal. Tell your servicer the extra money is for principal, then check your next statement. This calculator assumes it all goes there.
- Look for a prepayment penalty. The CFPB says small regular extra payments normally don't trigger one, while paying off the whole balance or a large chunk within the penalty period can. Your loan documents will say.
- Watch for a PMI date. If extra payments bring your balance to 80% of the home's original value, you can ask to cancel PMI ahead of schedule, which adds a saving this calculator doesn't count.
- Compare a refinance. If rates are well below yours, the refinance calculator may show a bigger saving than extra payments.
This calculator assumes a fixed rate and leaves out tax effects and servicer fees. If you're struggling to make the required payment, skip the extra payments and talk to a HUD-approved housing counselor, often at little or no cost.
Common questions
Does paying extra lower my required monthly payment?
No. On a standard fixed-rate schedule, your required payment stays the same and the loan ends sooner. That means you still owe the full payment next month, even after sending a large lump sum, so don't drain the cash you'd need to cover it.
How do I find my exact mortgage payoff amount?
Ask your servicer for a payoff statement. Federal rules require it within seven business days of a written request in most cases. The figure is what clears the loan on a specific date, so it usually won't match the balance on your last statement. Use it, not this calculator, when you actually pay off the loan.
Does this calculator include taxes and insurance?
No, and that's on purpose. Escrow pays your tax and insurance bills and doesn't reduce the loan. Paying off the mortgage ends the loan, but you'll still owe those bills, and you'll pay them directly once escrow ends. For the full monthly picture, use the mortgage calculator.
Can I add both monthly extras and a lump sum?
Yes. Open the advanced settings to combine an extra monthly amount with an extra each year, a one-time payment now, and biweekly payments. The one-time payment here is applied right away. To model a later lump sum, the mortgage calculator lets you choose the month.
Will this work for a car or personal loan?
The math is the same for any fixed-rate loan with extra payments applied to principal. For those loans, the loan calculator is the better fit since it isn't set up around a mortgage.
Sources
- 12 CFR 1026.36: payment crediting and payoff statements (Regulation Z) · Consumer Financial Protection Bureau
- What is a prepayment penalty? · Consumer Financial Protection Bureau
- When can I remove private mortgage insurance (PMI) from my loan? · Consumer Financial Protection Bureau
- CFPB files suit against Nationwide Biweekly (May 11, 2015) · Consumer Financial Protection Bureau
- Determine your down payment · Consumer Financial Protection Bureau
- Publication 936: Home Mortgage Interest Deduction · Internal Revenue Service