Explore extra payment strategies and see your savings
Principal & Interest payment only (P&I)
$2,998/mo
26 half-payments a year is one extra payment. An early dollar saves more than a late one — see the prepay curve.
Want the lump sum to lower your payment instead? Try a recast.
Compare extra monthly payments
Interest saved ($)
Click an amount to select it
You'll Save
$122,846
with $250/month extra
Years saved
5.4
New payoff
24.6 yrs
Return*
167.1%*
Standard vs Extra Payments
Balance Over Time
Remaining balance ($)
Prepaying shortens the loan but does not lower the payment — a recast does that instead. Today’s rates →
Altgage Inc. NMLS #2447252 | 100 Cambridge St, Floor 14, Boston, MA 02114There are only four levers, and they trade off against each other in ways the marketing around this topic tends to blur.
Add extra principal each month. The most flexible option and the one with no cost. You can stop any month, and every dollar goes straight at the balance. Nothing gets locked in.
Pay biweekly. Half your payment every two weeks is 26 half-payments a year, which is 13 full payments instead of 12. It’s the same as adding one-twelfth of a payment monthly, and you can do it yourself for free — servicers charging a setup fee plus a per-debit fee for the official program are charging you for automation, not for math.
Make a lump sum against principal. A bonus, an inheritance, proceeds from a sale. The earlier it lands, the more it does — a dollar in year one erases three decades of future interest on that dollar, and a dollar in year twenty-five erases almost none.
Refinance into a shorter term. A 15-year rate typically runs below a 30-year, so this is the only lever that improves your rate as well as your timeline. It’s also the only one that commits you: the higher payment becomes mandatory, and you pay closing costs to get there.
The first three are reversible. The fourth isn’t. If you’re not certain the higher payment survives a job change, the extra-principal route reaches the same payoff date with none of the commitment and none of the closing costs.
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 — and any of those means you get none of the effect modelled above. Send it as a separate transaction marked apply to principal and check the next statement. The extra payment calculator goes deeper on this.
They answer different questions. Prepaying buys time — the loan finishes sooner but the required payment never moves. A recast buys cash flow — the servicer re-amortizes a smaller balance over your remaining term, cutting the payment while keeping the payoff date. Same money, opposite outcome.
Prepaying earns you a guaranteed return equal to your mortgage rate. That’s the whole financial case, and whether it’s a good deal depends entirely on what that rate is.
Against a 7% mortgage, a guaranteed 7% return with no market risk is genuinely hard to beat. Against a 3% mortgage taken in 2021, it’s a poor trade — you’re retiring cheap debt you will never be offered again, and the same money in a savings account has recently paid more than that with full liquidity.
Three things generally come first regardless of the rate. High-interest debt, because a 22% credit card beats any mortgage rate on the board. An employer 401(k) match, because that’s an immediate return no mortgage rate approaches. And a real emergency fund, because home equity is the worst kind of illiquid — a paid-ahead mortgage does nothing for you if income stops, and you can’t ask for last year’s extra payments back.
There’s also a non-financial answer that’s worth taking seriously. Some people sleep better without a mortgage, and that has value even when the spreadsheet says invest instead. Just make it a choice you’ve priced rather than a rule you inherited.
On most owner-occupied mortgages originated in the last decade, no. Federal rules sharply restrict prepayment penalties on qualified mortgages, and the vast majority of conventional, FHA and VA loans carry none. The exceptions worth checking are non-QM products — DSCR and bank-statement loans among them — where prepayment penalties remain common. Your note and closing disclosure will say.
Yes, in full or in part, at any time on nearly all standard mortgages. You can send extra principal monthly, make lump sums, or pay the balance off entirely. The only common obstacle isn’t permission — it’s making sure your servicer applies the extra money to principal rather than holding it toward next month’s payment.
On a typical 30-year loan, a consistent extra $200 a month started early cuts roughly five to seven years off the term. The exact figure depends on your balance, rate and how far into the loan you are — the calculator above runs it on your actual numbers, and the difference between starting now and starting in five years is usually larger than people expect.
No. Extra principal shortens the loan; it doesn’t reduce the required payment, which stays the same until the loan is gone. If lowering the monthly payment is the actual goal, you want a recast — the servicer re-amortizes the smaller balance over your remaining term, cutting the payment while keeping the payoff date.
It comes down to your mortgage rate against what you could reliably earn elsewhere, adjusted for the fact that prepaying is guaranteed and investing isn’t. A 7% mortgage makes prepaying competitive with most expected market returns on a risk-adjusted basis; a 3% mortgage generally doesn’t. Clear high-interest debt, capture any employer match, and fund an emergency reserve before either.
A lump sum wins when it arrives early enough to reshape the schedule; a monthly habit usually wins on total interest because it keeps working for the full term. Both beat waiting — timing matters more than amount on a front-loaded amortization schedule, so the version you’ll actually sustain is the right one.
You don’t need permission, but you do need to direct the money. Send extra principal as a separate transaction marked “apply to principal,” then verify on the next statement that the balance dropped by what you sent. Servicers vary in how they handle unlabeled extra funds — some apply it to next month’s payment, some park it in suspense, and either outcome means you got none of the effect.