Extra Mortgage Payment Calculator

How extra mortgage payments save interest

A fixed-rate mortgage charges interest each month on the balance you still owe. Your regular payment covers that month's interest first and the rest goes to principal, so early in a 30-year loan most of the payment is interest. Any extra amount goes straight to principal, which makes every later month's interest smaller and the loan end sooner. The regular payment does not change; the loan just runs out of balance earlier.

Worked example: $350,000 at 6.5% with 30 years left is $2,212 a month and $446,406 of interest over the term. Add $200 a month and the loan ends after 286 payments instead of 360, 6 years and 2 months sooner, with $338,309 of interest, a saving of $108,097. You send $57,000 extra in total to save nearly twice that.

Biweekly payments, yearly payments or one lump sum

A biweekly plan pays half the monthly payment every two weeks. There are 26 two-week periods in a year, so you make 13 full payments instead of 12: one extra payment a year, or one twelfth of a payment a month. The calculator models it that way, which is how most servicers apply it, since many hold half-payments until a full payment is in hand. You can get the same result for free by adding one twelfth of your payment to each monthly payment as principal, without signing up for a paid biweekly program.

Monthly beats yearly for the same total because the money arrives sooner. A lump sum you already have is worth more than the same amount drip-fed over years. If you want a lower required payment instead of a shorter loan, a lump sum plus a recast does that. And if you pay PMI, extra principal moves the date you can ask to cancel it: see the PMI removal calculator.

Before you pay extra: principal, penalties and priorities

Make sure the servicer applies the extra to principal. Most servicers have an "additional principal" field online or on the payment coupon; without it, the money may sit as a prepayment of next month's bill and save nothing. Then check your note for a prepayment penalty. The CFPB says that where a penalty exists it usually applies to paying off the whole loan within the first three or five years, sometimes to paying off a large portion at once, and normally not to small extra principal payments, but your loan documents are the final word.

Paying down a 6.5% mortgage is a guaranteed 6.5% return, but it is not liquid: you cannot take the money back out without borrowing. An emergency fund, high-rate debt and an employer retirement match usually come first.

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