Extra Mortgage Payment Calculator

Making extra payments on your mortgage is one of the highest guaranteed-return financial moves available to homeowners. Every extra dollar of principal you pay reduces the balance on which future interest is charged, and because mortgages are front-loaded with interest, extra payments early in the loan have the most impact.

Formula: Monthly Interest = Remaining Principal × (Annual Rate ÷ 12) Principal Reduction = Monthly Payment − Monthly Interest Interest Saved = Standard Total Interest − New Total Interest (with extra payments) Time Saved = Standard Loan Term − New Payoff Month

How amortization works: In the early years of a 30-year mortgage, most of each payment is interest. On a $300,000 loan at 7%, month 1’s payment of ~$1,996 breaks down as:

• Interest: $300,000 × (0.07 ÷ 12) = $1,750
• Principal: $1,996 − $1,750 = $246

Every extra dollar you pay goes 100% to principal reduction.

Worked example: $300,000 mortgage, 7% interest, 30-year term. Standard monthly payment: $1,996 Total interest over 30 years: $418,527

Adding $200/month extra from day one: New payoff time: 22 years 11 months (saves 7 years 1 month) Total interest paid: $301,887 Interest saved: $116,640

Adding $500/month extra: New payoff: 17 years 4 months (saves 12 years 8 months) Interest saved: $200,235

One extra payment per year: Thirteen payments a year instead of twelve is the same thing as adding one twelfth of a payment every month, which on this loan is about $166. That buys you 6 years 2 months off the term and $102,280 of interest.

Every figure above comes out of the calculator on this page. Put the numbers in and check.

Notice how little the extra has to be. The jump from nothing to $166 a month buys six years; the jump from $200 to $500, which is two and a half times as much money, only buys another five and a half. The first dollars of overpayment are worth far more than the last, because they are removing interest from the most expensive end of the loan.

Important considerations:

• Check your loan for prepayment penalties (rare but still exist in some loans).
• Verify extra payments are applied to principal, not future payments. Specify this in writing.
• Compare the guaranteed 7% “return” of paying down your mortgage vs. investing the extra in a broad index fund (historically ~10% returns but with volatility and risk).