How to use the Extra Payment Calculator
- Enter your current loan balance, not the original amount borrowed.
- Enter the interest rate and the number of years remaining on the schedule.
- Enter the extra amount you would add to each monthly payment.
- Read the interest saved and the time saved, which are the two returns on that money.
- Compare the interest saved against what the same money would earn invested before committing.
How the calculation works
Every extra dollar goes straight to principal, and principal that is gone stops accruing interest for the entire remaining term. That is why the effect is so disproportionate: on a 30-year mortgage, an extra $200 a month is about 10% more cash out but often cuts more than 20% of the total interest and five or more years off the term.
Timing matters more than most people expect. Early payments are almost entirely interest, so extra principal applied in year one avoids nearly three decades of compounding on that amount. The same extra payment in year twenty-five avoids only a few years of interest. Front-loading extra payments is worth far more than spreading the same total across the life of the loan.
The return on prepayment is exactly your mortgage rate, guaranteed and risk-free — but it is also after-tax only if you do not itemise, and it is illiquid, since money paid into a house cannot be withdrawn without a refinance or a sale. At a 3% mortgage rate, investing usually wins; at 7%, guaranteed 7% is hard to beat. Fill an emergency fund and capture any employer retirement match before either.
Each month: interest = balance × r/12; balance = balance − (payment + extra − interest); iterate until balance ≤ 0Source: Standard amortisation mathematics; CFPB guidance on applying extra payments to principal and confirming servicer handling.
Worked example
A $320,000 balance at 6.5% with 30 years left, adding $200 a month.
- Base payment is about $2,023 a month.
- Without extra payments, total interest is roughly $408,000 over 360 months.
- At $2,223 a month the loan clears in about 300 months.
- Total interest falls to roughly $346,000.
Around $62,000 of interest saved and five years off the term, for $200 a month — an effective guaranteed return of 6.5%.
Frequently asked questions
Do I need to tell my lender the extra is for principal?+
Yes. Many servicers apply unlabelled extra money to the next payment or to escrow instead of principal. Specify 'apply to principal' every time and verify on the next statement.
Is a biweekly payment plan the same thing?+
Roughly. Twenty-six half payments equal thirteen monthly payments a year, which is one extra payment. You can replicate it free by paying an extra one-twelfth each month.
Should I prepay or invest instead?+
Compare your mortgage rate to your expected after-tax investment return. Prepaying is guaranteed and illiquid; investing has higher expected return and real risk.
Do extra payments lower my monthly payment?+
No, they shorten the term. Only a formal recast or refinance reduces the required monthly amount.
Last reviewed September 1, 2026. We review this page whenever the underlying formula, tax year, published rate or standard changes.