Transparent method
The formula
Worked example
Example inputs
How to interpret the result
An extra principal payment applied early in a mortgage removes more future interest than the identical extra payment applied later, because interest each month is calculated on the current balance, and an earlier reduction compounds its effect over more remaining months than a later one does.
Before you rely on it
What to check
Compare interest saved from an extra payment made now against the same extra payment delayed, since timing changes how much total interest that payment actually removes.
The common error
Where people go wrong with extra mortgage payment calculator
Assuming an extra payment's benefit is identical regardless of when during the loan it's made. Extra payments made earlier in the loan, against a larger remaining balance and longer remaining term, remove more total interest.
Sensitivity evidence
How interest rate changes the interest saved
| Interest rate | Interest saved | Months paid off early |
|---|---|---|
| 4.5% | $47,980 | 62.3 months |
| 5.5% | $63,396 | 64.3 months |
| 6.5%worked example | $80,982 | 66.6 months |
| 7.5% | $100,944 | 69.2 months |
| 8.5% | $123,475 | 72.3 months |
Every input, tested
Which input moves the interest saved most
| Input | Tested from | To | Interest saved at each end | Swing |
|---|---|---|---|---|
| Remaining term | 19.0 years | 31.0 years | $44,028 to $130,930 | $86,902 (107%) |
| Interest rate | 5.5% | 7.5% | $63,396 to $100,944 | $37,548 (46%) |
| Extra monthly payment | $225 | $275 | $74,951 to $86,696 | $11,745 (15%) |
| Loan balance | $279,000 | $341,000 | $78,582 to $83,065 | $4,483 (5.5%) |
Two variables at once
Interest saved by interest rate and loan balance
| Interest rate \ Loan balance | $248,000 | $310,000 | $372,000 |
|---|---|---|---|
| 4.5% | $45,248 | $47,980 | $49,998 |
| 5.5% | $59,569 | $63,396 | $66,247 |
| 6.5% | $75,785 | $80,982 | $84,890 |
| 7.5% | $94,041 | $100,944 | $106,186 |
| 8.5% | $114,471 | $123,475 | $130,388 |
Step by step
The worked example, input by input
| Input | Value used |
|---|---|
| Loan balance | $310,000 |
| Interest rate | 6.5% |
| Remaining term | 25.0 years |
| Extra monthly payment | $250 |
| Interest saved | $80,982 |
| Months paid off early | 66.6 months |
Where the inputs come from
Take the balance, rate and remaining years from a current statement; the interest rate is the note rate, not the APR. The extra monthly payment is the amount you would add to principal each month, which can be as small as $50. Make sure the servicer's payoff and the schedule agree by checking the interest paid to date on the annual statement. The results assume extra money goes to principal the month it is received.
When the result stops applying
Before committing, confirm there is no prepayment penalty, keep an emergency fund because equity in a house is illiquid, and consider whether you have higher-rate debt. Extra payments do not lower the required monthly payment unless the loan is recast, so the safety of a lower minimum only comes with a recast.
What to compare it with
Extra payments are one of several ways to use spare cash, and the best one depends on your rate and goals. Compare the guaranteed return of paying down the loan with investing in a retirement plan with a match, which usually beats it, and with clearing higher-rate debt, which always does. Keep a cash reserve before sending extra principal, because you cannot get it back without borrowing. The biweekly and recast calculators show related approaches.
People also ask
Frequently asked questions
Should I make extra payments or invest?
It depends on the loan's rate and your alternatives. A guaranteed saving equal to the mortgage rate is competitive with low-risk investments but lower than expected long-run stock returns.
Do extra payments reduce my required payment?
No. The required payment stays the same and the loan simply ends sooner, unless you ask the servicer to recast the loan after a large principal payment.
How do I tell the servicer to apply extra to principal?
Use the separate principal line on the online payment page or write it on the check, then confirm on the next statement.