Why early dollars punch so hard
In the first years of a fixed-rate mortgage, a larger share of the principal-and-interest payment generally goes to interest because the outstanding balance is still high. An extra dollar correctly applied to principal reduces the balance on which later interest is calculated. Sending the same extra amount earlier therefore reduces more modeled interest than sending it later.
Three flavors of acceleration, all modeled here or one click away: extra monthly (this page), biweekly half-payments (the automatic version — one extra payment a year), and a recast if what you actually want is a lower payment rather than a faster finish.
Checklist before you accelerate
- Check for a prepayment penalty — confirm the terms in your loan documents before sending extra principal.
- Compare other debts — a balance at 24% accrues at a much higher nominal rate than a mortgage at 6.5%; run the payoff comparison.
- Emergency fund intact — money sent to the mortgage is illiquid; you can’t un-pay it in a crisis.
- “Apply to principal” — say it explicitly to your servicer, verify on the next statement.
Method, example, and sources
How this calculator works
Each month, the model charges one-twelfth of the annual rate on the remaining principal, applies the regular payment, and then applies the selected extra amount to principal. The baseline and accelerated schedules use the same fixed rate and stop when the remaining balance reaches zero.
Worked example
For the default $300,000 balance at 6.5%, a $2,100 regular payment takes about 23 years in this model. Raising the payment to $2,400 shortens it to about 17 years and 6 months and reduces modeled interest by roughly $75,624. The result assumes the servicer credits every extra dollar to principal.
What the estimate leaves out
- Property tax, homeowners insurance, mortgage insurance, escrow changes, and servicing fees are excluded.
- The interest rate and payment stay fixed; adjustable-rate loans require a different model.
- The calculator does not determine whether a prepayment penalty applies or whether investing the extra cash would be preferable.
Primary sources
Frequently asked questions
How much do extra mortgage payments actually save?
Every extra dollar goes straight to principal, which stops accruing interest for the entire remaining life of the loan. On a typical balance at 6–7%, an extra $200–$300 a month commonly removes 5–8 years and tens of thousands of dollars in interest. The earlier in the loan, the bigger the effect — early payments are almost all interest.
Is it better to pay extra monthly or make one lump sum?
Dollar for dollar, sooner beats later: a lump sum today saves more than the same total spread over years. In practice the best plan is whatever you’ll actually sustain — this calculator accepts both at once, so you can model a tax-refund lump sum plus a modest monthly extra.
Should I pay off my mortgage early or invest?
Prepaying avoids future interest at the loan’s contractual rate under the terms of your mortgage; the net benefit can be lower if you itemize a mortgage-interest deduction or face a prepayment charge. Investing may offer a higher expected return but adds market risk and less certainty. Compare after-tax outcomes, keep adequate cash reserves, and capture any employer match before choosing.
Will my monthly payment go down if I pay extra?
No — extra principal payments shorten the loan but leave the required payment unchanged. If a lower payment is what you want, that’s a recast: a lump sum plus a servicer re-amortization. Our mortgage recast calculator covers that path.
Do I need to tell my servicer anything?
Yes: mark extra amounts as “apply to principal.” Otherwise many servicers treat them as an early payment of next month’s bill, which saves you nothing. Check your next statement to confirm the balance dropped by the extra amount.