Extra Mortgage Payment Calculator
See exactly how much you save in interest and how many years you cut from your mortgage by making extra monthly, yearly, one-time, or biweekly payments.
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Apply Now → Or call (877) 411-0123How Extra Mortgage Payments Work
Every standard mortgage payment is split into two parts: principal (the amount you originally borrowed) and interest (the lender's charge for lending you money). Early in the loan, most of your payment goes toward interest. As you pay down the principal, the interest portion shrinks and more of each payment chips away at the balance.
When you make an extra payment designated as "principal only," the entire amount goes directly toward reducing your loan balance. This immediately lowers the base on which future interest is calculated, creating a compounding effect that accelerates your payoff timeline. The earlier you start making extra payments, the more dramatic the savings because you eliminate interest that would have accrued over the remaining decades of the loan.
Key Takeaway: Extra mortgage payments don't just shave months off your loan. They reduce the total interest you pay over the life of the mortgage. On a 30-year, $300,000 loan at 6.38%, an extra $200 per month saves over $72,000 in interest and pays off the home roughly 6 years ahead of schedule.
4 Strategies to Pay Off Your Mortgage Faster
1. Extra Monthly Payments
The most straightforward approach. You add a fixed dollar amount on top of your required payment every month. Even modest amounts compound over time. An extra $100 per month on a $250,000 mortgage at 6% cuts nearly 5 years off a 30-year term and saves tens of thousands in interest. The consistency of monthly payments makes this the most popular strategy because you can budget for it alongside your regular expenses.
2. Yearly Lump-Sum Payments
If you receive an annual bonus, tax refund, or other windfall, applying it as a lump-sum principal payment once a year can be highly effective. A single extra payment of $3,000 each year achieves similar results to smaller monthly contributions, but requires less ongoing discipline. The key is timing: the earlier in the year you make the payment, the more interest you avoid over the following months.
3. One-Time Principal Payment
Received an inheritance, sold an asset, or came into a lump sum? A one-time principal-only payment immediately reduces your balance and shortens your remaining term. Even a single $5,000 or $10,000 payment early in a mortgage can save thousands in interest over the remaining life of the loan due to the compounding effect.
4. Biweekly Payment Schedule
Instead of making 12 monthly payments, you pay half your monthly amount every two weeks. Since there are 52 weeks in a year, this results in 26 half-payments, equivalent to 13 full monthly payments. That one extra payment annually can shave approximately 4 to 6 years off a 30-year mortgage without requiring you to budget for a dramatically larger monthly expense. This strategy works especially well for borrowers who are paid biweekly.
Real-World Example
Sarah has a $350,000 mortgage at 6.5% with 28 years remaining. Her required monthly payment is $2,212. By adding $250 per month in extra principal payments, she will pay off her mortgage in approximately 21 years instead of 28, saving over $103,000 in interest. That $250 per month investment in extra payments generates a guaranteed 6.5% return, tax-free of risk.
Should You Pay Off Your Mortgage Early or Invest?
This is one of the most common financial questions homeowners face, and the answer depends on your complete financial picture. Making extra mortgage payments provides a guaranteed return equal to your interest rate. If your mortgage rate is 6% or higher, that is a compelling, risk-free return that many investments cannot reliably match after taxes and fees.
However, before directing extra funds toward your mortgage, consider whether you have high-interest debt such as credit card balances. Credit card rates of 18% to 25% make paying down that debt a far higher priority. Similarly, contributing to tax-advantaged retirement accounts like a 401(k) with an employer match or an IRA may provide better long-term returns than accelerating your mortgage payoff.
A balanced approach often works best: eliminate high-interest debt first, capture any employer retirement match, build a 3-to-6-month emergency fund, and then direct remaining discretionary income toward extra mortgage payments. This ensures you are optimizing across all financial goals rather than focusing narrowly on one.
Prepayment Penalties: What to Know
Before making large extra payments, check whether your loan includes a prepayment penalty. These clauses allow lenders to charge a fee if you pay off the loan ahead of schedule. The good news: prepayment penalties have become uncommon in recent years. FHA loans, VA loans, and mortgages from federally chartered credit unions prohibit them entirely. Most conventional loans originated after 2014 also exclude prepayment penalties due to the Qualified Mortgage (QM) rules established by the Consumer Financial Protection Bureau.
If your loan does include a prepayment penalty, it typically only applies during the first three to five years and may be structured as a percentage of the outstanding balance or as a certain number of months' interest. Review your loan documents or contact your servicer to understand the specific terms before committing to an accelerated payoff strategy.
How to Ensure Extra Payments Are Applied Correctly
One common pitfall: some loan servicers apply extra payments toward the next month's payment rather than directly to principal. To avoid this, always specify that your additional payment should be applied as a "principal-only" payment. Most online banking portals and service websites have an option to designate payments this way. If paying by check, write "apply to principal only" in the memo line and include your loan number.
After making an extra payment, verify on your next statement that the additional amount reduced your principal balance and did not simply advance your due date. If you notice discrepancies, contact your servicer immediately to correct the allocation.
What Our Clients Are Saying
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What Our Clients Are Saying
Don't just take our word for it. Hear from the families we've helped
secure their dream homes.
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Frequently Asked Question
How much can I save by making extra mortgage payments?
The savings depend on your loan balance, interest rate, and how much extra you pay. For example, adding $200 per month to a $300,000 mortgage at 6.38% can save you over $72,000 in interest and cut roughly 6 years off a 30-year loan. Use the calculator above to see your exact savings.
Should I make extra mortgage payments or invest the money?
It depends on your financial situation. Extra mortgage payments offer a guaranteed return equal to your interest rate with zero risk. If your mortgage rate is 6% or higher, paying it down is a strong choice. However, if you have high-interest debt like credit cards, pay those off first. Consider maxing out tax-advantaged retirement accounts before making extra mortgage payments.
Is it better to pay extra monthly or make a lump sum payment?
Both approaches reduce your balance and save interest, but monthly extra payments typically work better for most people because they build a consistent habit and reduce your principal steadily throughout the year. A lump sum payment is effective if you receive a bonus or inheritance. The key factor is timing: the earlier you make extra payments, the more interest you save.
Do extra mortgage payments go toward the principal?
Yes, when you make an extra payment and specify it as a principal-only payment, the entire amount goes toward reducing your loan balance. This is different from your regular payment, which splits between principal and interest. Always confirm with your lender that extra payments are applied to principal, not future payments.
Are there penalties for paying off a mortgage early?
Most modern mortgages do not have prepayment penalties. FHA loans, VA loans, and loans from federally chartered credit unions prohibit prepayment penalties by law. However, some conventional loans may include a penalty during the first 3 to 5 years. Check your loan agreement or ask your lender before making large extra payments.
How do biweekly mortgage payments work?
Instead of making 12 monthly payments per year, you pay half your monthly amount every two weeks. Since there are 52 weeks in a year, this results in 26 half-payments, which equals 13 full monthly payments. That one extra payment per year can shave several years off your mortgage and save thousands in interest.
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