How much do extra mortgage payments actually save?

More than most people expect, because the saving compounds. An extra $200 a month on a $400,000 loan at 6.5% removes $111,892 of interest and clears the loan five and a half years early — for $58,400 of extra payments, so each dollar removes about $1.92 of interest. The figure scales with the rate: the same extra on a 4% loan removes far less, because there was less interest there to cancel in the first place.

Does it matter when I start paying extra?

Enormously, and this is the single most underrated fact about prepayment. An early dollar cancels interest that would have accrued every month for the whole remaining term; a late dollar has almost nothing left to cancel. Starting $200 a month immediately saves $111,892. Starting the same amount ten years in saves $41,859 — sixty-three percent of the benefit lost to the delay. If you are going to do this at all, the case for starting now rather than next year is strong.

Is a lump sum better than paying extra each month?

Per dollar, considerably better — provided it lands early. A single $20,000 in the first year removes $102,061 of interest, while $200 a month over twenty-four years removes $111,892 and costs $58,400 to achieve. The lump captures ninety-one percent of the benefit for thirty-four percent of the outlay, because the whole amount starts working at once instead of arriving in slices. If a bonus or windfall is available, applying it early beats spreading it out.

Will extra payments lower my monthly payment?

No. The payment stays exactly the same and the loan simply ends sooner — you are buying time, not breathing room. If you want a lower payment instead, ask the servicer about recasting: after a substantial lump sum some lenders will re-amortise the remaining balance over the remaining term, which reduces the payment while keeping the payoff date. Recasting usually carries a small fee and is not available on every loan, but it is far cheaper than refinancing for the same effect.

How do I make sure the extra goes to principal?

Tell the servicer explicitly, in writing where you can, and then check the next statement. Left to itself, an unallocated extra payment is often credited toward the next instalment — which puts you ahead on the schedule but does nothing to the balance and saves no interest whatever. Many servicers offer a principal-only option online or a separate field on the payment coupon. The one thing you should not do is assume: verify that the balance moved by the amount you paid.

What return do I get from paying extra?

Exactly your mortgage rate, guaranteed, and not taxable as income. A dollar prepaid against a 6.5% loan avoids 6.5% compounding for as long as the loan would have run — that is a mathematical identity, not an estimate. It compares well with a savings account and poorly with an employer match. Note that if you itemise and deduct mortgage interest, the effective return is lower, because some of the interest you are avoiding was being subsidised.

Should I pay extra on the mortgage or invest instead?

The arithmetic is straightforward and the decision is not. A prepayment returns your mortgage rate with certainty; investing offers a higher expected return with real risk and no guarantee over any particular period. What tips it in practice is usually not the rate comparison but liquidity — money in the mortgage is very hard to get back out, and a household with no cash reserve that has poured everything into principal can be forced into expensive borrowing by one setback. Most sequences put an emergency fund and any employer match first, then compare rates.

Should I pay off the mortgage before other debts?

Usually not. A mortgage is generally the cheapest debt a household has, and paying it down while carrying a credit card at twenty percent means earning six and paying twenty on the same dollar. The ordering that follows from the arithmetic is: clear high-interest debt first, take any employer retirement match, build a reserve, then compare what is left against the mortgage rate. The mortgage feels the most urgent because it is the largest, but size is not the same as cost.

Are there downsides to paying extra?

Two worth weighing. The first is liquidity: every dollar in the mortgage is a dollar you cannot reach without borrowing it back, and home equity is the slowest asset there is to convert. The second is opportunity cost, which is the flip side of the guaranteed return — certainty is worth something, but it is not free. There is also a narrow risk of a prepayment penalty on some loans, which is uncommon on modern American residential mortgages but worth checking in the note before making a large payment.

Is it better to pay extra or refinance to a shorter term?

A shorter term usually carries a lower rate, which is a genuine advantage extra payments cannot match — but it also removes your choice. A fifteen-year loan commits you to the higher payment whether or not the month suits, while extra payments on a thirty-year loan can be paused at any time with no consequence. The honest comparison is the rate difference against the value of that flexibility, plus closing costs on the refinance, which can run to several thousand dollars and take years to recover.

Extra Mortgage Payment Calculator

Interest each month is your balance multiplied by the rate. That is the whole mechanism, and it explains everything an extra payment does: money you hand over early removes principal that would otherwise have been charged interest every single month until the loan ended. It also explains why the ti...

THE LOAN

LOAN AMOUNT ($)

TERM (YEARS)

INTEREST RATE (%)

Scheduled payment $2,528.27 a month.

THE EXTRA

EXTRA EACH MONTH ($)

STARTING FROM MONTH

INTEREST YOU NEVER PAY

$111,892

Paying $58,400 extra clears the loan 5y 7m early. Every dollar you put in removes $1.92 of interest — a guaranteed 6.50% return, which is what prepaying a loan always earns.

PAYS OFF IN

24y 5m

INSTEAD OF

30 years

PER $1 EXTRA

$1.92

Scheduled payment

$2,528.27

With your extra

$2,728.27

Pays off in

24y 5m

Instead of

30 years

Time saved

5y 7m

Interest, as scheduled

$510,178

Interest, with extra

$398,286

Interest saved

$111,892

Total extra paid in

$58,400

Saved per $1 of extra

$1.92

This is an estimate, not financial advice. A prepayment earns exactly your mortgage rate, guaranteed and untaxed — which is a good return, but not always the best one available. An unmatched employer retirement contribution, high-interest debt, or an empty emergency fund all generally rank ahead of it. Tell your servicer that extra money is for principal: a payment credited toward the next instalment achieves nothing at all.

THE GAP

The shaded area is the saving, not a picture of it. Interest each month is the balance times the rate, so the interest two loans differ by is exactly the gap between their balances, summed and multiplied by the monthly rate. Scrub the slider and the counter climbs with the area, because they are the same quantity.

Live calculation · updates as you type

Created with❤️byeaglecalculator.com

HOW TO USE

1
Enter the loan amount, term and rate. The scheduled payment appears underneath — everything you add on this page sits on top of that figure, not instead of it.
2
Enter the extra you can add each month, and the month you would start. Try changing the start month and watch the timing curve: the cost of waiting is usually larger than people expect.
3
Open lump sums and annual extras if a bonus or windfall is in play. A single payment early does a surprising amount of the work, because all of it starts compounding in your favour at once.
4
Check the saved-per-dollar figure. It tells you what each dollar of extra actually removed, which is the honest way to compare this against anything else you could do with the money.

WHAT DIFFERENT AMOUNTS DO

Extra each month	Pays off in	Interest saved	Per $1 of extra
$50	28y 4m	$34,465	$2.03
$100	26y 10m	$63,917	$1.99
$200	24y 5m	$111,892	$1.91
$500	19y 5m	$205,557	$1.76
$1,000	14y 9m	$288,297	$1.63

Notice that the return per dollar falls slightly as the extra grows. That is not a diminishing rate — every dollar still earns the mortgage rate — but a shorter loan simply has less remaining interest left to cancel, so the later dollars have less work to do.

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Last updated: July 30, 2026 · Formula verified · Eagle-eyed accuracy for every calculation.