See how extra payments accelerate your payoff
Principal & Interest payment only (P&I)
$2,998/mo
An early dollar saves more than a late one — see the prepay curve.
Want the lump sum to lower your payment instead? Try a recast.
Compare extra monthly payments
Interest saved ($)
Click an amount to select it
You'll Save
$122,846
with $250/month extra
Years saved
5.4
New payoff
24.6 yrs
Return*
167.1%*
Standard vs Extra Payments
Balance Over Time
Remaining balance ($)
Send extra as a separate payment marked apply to principal, or your servicer may bank it for next month. Today’s rates →
Altgage Inc. NMLS #2447252 | 100 Cambridge St, Floor 14, Boston, MA 02114Every dollar you send beyond the required payment goes straight at the principal, and it never accrues interest again — not this month, not in year twenty-eight. That’s the whole mechanism. What makes it feel surprising is when you do it: the same $250 sent in year one and in year twenty buys wildly different amounts of interest, because the early dollar has three decades to keep not-accruing and the late one has almost none.
A mortgage is front-loaded with interest. In the first years, most of your payment is rent on the money and only a sliver touches the balance — so an extra dollar there jumps you further down the schedule than the same dollar later. This is also why the savings shrink the longer you wait to start, and why “I’ll begin once I get a raise” is more expensive than it sounds.
A lump sum is a single large cut early; a monthly extra is a small cut that compounds every month for decades. Neither is universally better — run both above. The rule of thumb: a lump sum wins when it lands early enough to reshape the schedule, and a monthly habit wins on total interest because it keeps working for the full term.
This surprises people. Prepaying shortens the loan; it does not lower the monthly payment. If lowering the payment is the actual goal, you want a recast — you make a lump-sum payment and the servicer re-amortizes the smaller balance over the remaining term, cutting the payment while keeping the payoff date. Same money, opposite outcome. Prepaying buys time; recasting buys cash flow.
Servicers don’t all treat extra money the same way. Some apply it to next month’s payment, some park it in suspense, some prepay escrow. Any of those and you get none of the effect this page is showing. Send it as a separate transaction marked apply to principal, then check next month’s statement that the balance actually dropped by what you sent.
It’s total interest saved divided by total extra paid — so 80% means every extra dollar spared you 80 cents of interest across the whole loan. It is not an annual rate. Spread over the years it took, the annualised equivalent is roughly your mortgage rate, and that’s the number to hold against an investment return, not the headline percentage.
Prepaying earns you a guaranteed return equal to your mortgage rate, tax-free. That is a good deal against a 7% mortgage and a poor one against a 3% mortgage you’ll never see again. Before prepaying: clear high-interest debt, capture any employer 401(k) match, and hold a real emergency fund — money in the house is illiquid, and a paid-ahead mortgage won’t help you make next month’s payment if income stops.
Prepaying has a second payoff here. Reaching 80% loan-to-value lets you request PMI cancellation, and dropping that premium is an immediate monthly saving on top of the interest. If you’re near that line, the first stretch of extra payments is worth noticeably more than the calculator above shows — it prices the interest, not the insurance you stop paying.
There’s no correct number, but there is a useful way to pick one.
Start with what you can sustain without touching your emergency fund, because the value of extra payments comes from consistency and the worst outcome is prepaying for two years then drawing it back out on a credit card at 22%.
Then check three thresholds. One-twelfth of your payment replicates the biweekly effect, roughly one extra payment a year, and typically takes four to six years off a 30-year loan. Enough to reach 80% LTV is worth targeting on its own if you’re paying PMI, because cancelling the premium is an immediate monthly saving on top of the interest. And whatever gets you to a round payoff year — some people find “done in 20” more motivating than an abstract interest figure, and motivation is what makes this work over decades.
Run each in the calculator above. The difference between $100 and $200 a month is usually larger than people guess, and the difference between starting now and starting in three years usually larger still.
On a typical 30-year loan started early, an extra $100 a month cuts roughly three to four years off the term and saves tens of thousands in interest. The exact figure depends on your balance, rate and how far into the loan you are — the calculator above runs it on your numbers.
Not always, and this is where the strategy quietly fails. Some servicers apply unlabeled extra funds to next month’s payment, some hold them in suspense, some prepay escrow. Send it as a separate transaction marked “apply to principal” and verify on the next statement that the balance dropped by what you sent.
Prepaying is a guaranteed return equal to your mortgage rate; investing is a higher expected return with risk. Against a 7% mortgage prepaying is competitive on a risk-adjusted basis; against a 3% mortgage it generally isn’t. Clear high-interest debt, capture any employer match, and fund an emergency reserve before either.
No. Extra principal shortens the loan without changing the required payment. If a lower monthly payment is the goal, you want a recast — the servicer re-amortizes the smaller balance over your remaining term.