How extra payments save interest
Interest each month is charged on the remaining balance. Every extra dollar of principal stops accruing interest for the rest of the loan, and your regular payment keeps the same amount — so more of each later payment goes to principal. The calculator simulates every month:
interest = balance × rate ÷ 12
principal = payment − interest + extra
balance = balance − principal (repeat until 0)
Extra needed to finish in N months = P × r / (1 − (1 + r)^−N) − current payment
Worked example
$250,000 left at 6.5% with a $1,896.20 payment (the payment on a new 30-year $300,000 loan), adding $250 a month:
| Current payoff | 19 years 4 months |
|---|---|
| With +$250/month | 15 years 5 months |
| Interest saved | $43,526 |
| Extra needed to finish in 15 years | $281.57/month |
Should you pay off your mortgage early?
Paying extra earns a guaranteed return equal to your mortgage rate. Before doing it, most planners suggest having an emergency fund, capturing any employer retirement match and clearing higher-rate debt. Check that your loan has no prepayment penalty and tell your servicer to apply extra money to principal.
Frequently asked questions
Is it better to pay extra monthly or a lump sum?
The earlier money reaches principal, the more interest it saves. A lump sum now beats the same total spread over later months, but a steady monthly extra is easier to sustain.
Will paying extra lower my monthly payment?
Not on a standard fixed-rate loan. It shortens the term. Some lenders offer a recast that lowers the payment after a large lump sum, usually for a fee.