Mortgage Payoff Calculator

How extra payments shorten a mortgage

Every regular mortgage payment first covers the interest that built up on the balance during the month; only the rest reduces the principal. Money you pay on top of the regular payment goes entirely to principal, so the next month's interest is calculated on a smaller balance. Because this repeats every month, a modest extra amount early in the loan removes years of payments.

Regular payment = B × r ÷ (1 − (1 + r)^−n)
Each month: interest = balance × r; principal = payment + extra − interest; balance = balance − principal
Interest saved = interest with regular payments − interest with extra payments

Worked example

You owe $250,000 at 6.5% with 25 years left. The regular payment is $1,688.02.

• Paying the regular amount, you make 300 more payments and pay $256,405.37 in interest.
• Adding $200 a month ends the loan after 234 payments (19 years 6 months), 5 years 6 months early, and saves $64,927.88 in interest.
• Adding $500 a month ends it in 14 years 11 months and saves $115,668.35.
• A single $10,000 lump sum today, with no monthly extra, takes 2 years 3 months off and saves $36,982.20.

Ways to pay extra

• A fixed monthly extra, set up with your servicer, is the easiest to sustain.
• Biweekly payments (half the payment every two weeks) add up to 13 full payments a year, the same as one extra payment annually. Make sure your servicer applies them as they arrive rather than holding them.
• Lump sums from bonuses, tax refunds or an inheritance. Earlier lump sums save more because they stop interest for longer.
• Rounding up the payment, for example from $1,688 to $1,800.

Is paying off the mortgage early the best use of money?

Extra principal earns a guaranteed return equal to your mortgage rate. That is attractive at 6–7%, less so on a 3% loan. Before paying extra, most people are better off building an emergency fund, paying off higher-interest debt such as credit cards, and taking any employer 401(k) match. If you itemize deductions, mortgage interest may be deductible, which slightly lowers the effective rate.

Check with your servicer

• Write "apply to principal" with extra payments, or use the principal-only option online.
• Most US mortgages taken out today have no prepayment penalty, but check your note.
• Extra payments do not lower the required monthly payment; they shorten the loan. If you want a lower payment after a large lump sum, ask about a recast.

Extra payments versus a shorter loan

Paying $500 extra on the example loan comes close to the effect of refinancing to a 15-year term, but without closing costs and without committing to the higher payment. If money gets tight, you simply stop paying extra. A 15-year refinance usually brings a lower rate, which saves more interest, but the higher payment becomes mandatory. Many borrowers keep a 30-year loan for flexibility and prepay on their own schedule, then compare both options with the refinance calculator when rates fall.

Common mistakes

• Draining savings to prepay. Home equity is hard to get back without a new loan.
• Assuming biweekly programs are free. Some third-party services charge fees for what you can do yourself.
• Using the original loan amount. Enter today's balance and the years actually left.

Estimates assume a fixed rate and that every extra payment goes to principal in the month it is paid.

Frequently asked questions

Sources

• Consumer Financial Protection Bureau (consumerfinance.gov). Can I prepay my loan at any time without penalty?
• Consumer Financial Protection Bureau. What is a prepayment penalty?
• IRS Publication 936: Home Mortgage Interest Deduction.

Last reviewed 27 October 2026. Results are estimates; see our disclaimer.