๐ฆ Mortgage Extra Payment Calculator
Got a lump sum to put against your mortgage? See exactly how much interest a prepayment saves, and compare "shorten the term" against "lower the payment".
Tip: start from your current balance rather than the original loan amount โ your servicer's website or monthly statement shows the exact payoff figure, which makes the result much more accurate.
How to use the Extra Mortgage Payment Calculator
See how much interest you save by paying extra against principal, and compare shortening the term against lowering the monthly payment.
How it works
Extra payments reduce the outstanding principal, and interest accrues on that balance. The choice between the two strategies is the crux. Shortening the term keeps the payment fixed and cuts the schedule, saving the most interest but leaving monthly cash flow unchanged. Lowering the payment keeps the end date and frees up cash each month, saving less. Which wins depends on your interest rate and how much time is left.
When to use it
Use it to decide whether a windfall should go to the mortgage or to investments, to compare against the guaranteed return on an alternative, and to plan a recurring extra payment you can sustain.
Worked example
A $400,000 loan at 6.5% over 30 years, with $40,000 extra paid in year 3:
| Option | New payment | Time to payoff | Interest saved |
|---|---|---|---|
| No extra payment | $2,526.27 | 30 years | โ |
| Shorten the term | $2,526.27 unchanged | about 20 years | $214,000 |
| Lower the payment | $1,931.39 | 30 years | $118,000 |
Assumptions and limitations
Most lenders impose prepayment penalties, notice periods or minimum thresholds, and some restrict how often you can recast. Confirm the terms before committing. This assumes a constant rate and standard amortisation. Mortgage insurance, property taxes and escrow are not modelled. Not financial advice.
Frequently Asked Questions
Does one extra mortgage payment a year really make a difference?
Yes, and more than most people expect. Paying one extra monthly payment (one-twelfth of your payment) every year on a 30-year loan typically pays it off 4 to 6 years early and saves tens of thousands in interest. On a $300,000 loan at 6.5%, the biweekly-payment trick โ half a payment every two weeks, which produces 13 full payments a year โ cuts roughly 5 years off the term. The effect is largest in the early years, when almost all of your regular payment is interest.
Should I shorten the term or lower the monthly payment?
Shortening the term saves more interest for the same prepayment, because the balance is retired faster. Lowering the payment improves monthly cash flow instead. A common middle path: choose the lower payment, then voluntarily keep paying the old amount โ you get most of the interest savings while keeping the flexibility to pay less in a tight month. Ask your servicer to recast or recalculate the amortization so the choice actually takes effect.
Is it better to prepay the mortgage or invest the extra money?
Prepaying a 6.5% mortgage is a guaranteed, tax-free 6.5% return โ very hard to beat after taxes and risk. Prepaying a 3% mortgage competes poorly with long-term stock market averages, historically around 7โ10% before inflation. Many people split the difference: capture any employer 401(k) match first, keep an emergency fund, then prepay only if the mortgage rate is above what safe investments pay. The decision is personal; the rate spread is the math part.
Are there penalties or downsides to paying off a mortgage early?
Most US conventional loans have no prepayment penalty, but verify in your loan documents โ some FHA, VA and subprime loans issued with penalties still exist. Other watch-outs: extra cash locked in home equity is not liquid in an emergency, and paying down the loan does not reduce the property tax or insurance portion of your escrow. Never prepay while carrying higher-interest credit card or personal loan debt.
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