How much sooner will extra payments pay off my mortgage?
Every extra dollar goes straight to principal, so it never collects interest again. On a $300,000, 30-year mortgage at 6.5%, an extra $200 a month pays the loan off 6 years 11 months early and saves $103,449 in interest. The earlier the extra starts, the more it saves.
It works because interest is charged on the balance. Early in a loan most of each payment is interest, so a lower balance cuts the interest on every payment that follows.
“What happens if I pay an extra $200 a month on my 30-year mortgage?”
On $300,000 at 6.5%, you save $103,449 in interest and finish 6 years 11 months early. Try this scenario
How do I cut 10 years off a 30-year mortgage?
On that $300,000 loan at 6.5%, pay about $341 extra a month and it’s gone in 20 years. Paying it off in 15 years takes about $717 extra a month, and in 7 years about $2,559. Enter a payoff goal in the calculator and it works out the extra for your own loan.
“How much extra do I need to pay to cut 10 years off my 30-year mortgage?”
About $341 a month on $300,000 at 6.5%. Try this scenario
“I have $250,000 left with 25 years to go. How do I pay it off in 15?”
Pay about $490 extra a month at 6.5%. Try this scenario
“How do I pay off a 30-year mortgage in 7 years?”
On $300,000 at 6.5%, pay about $2,559 extra a month, more than doubling the payment. Try this scenario
Do bi-weekly payments really help?
Yes, a little. Paying half your payment every two weeks makes 26 half-payments, or 13 full payments, a year: one extra payment annually. On the $300,000 loan that saves $87,256 and 5 years 10 months. Adding a twelfth of your payment, $158, to each monthly payment does the same thing.
Before signing up, check that your servicer applies the extra to principal right away, and skip third-party bi-weekly programs that charge a fee for something you can do yourself.
“What do bi-weekly payments save on a $300,000, 30-year mortgage at 6.5%?”
$87,256 in interest, and the loan ends 5 years 10 months early. Try this scenario
What does a lump sum do?
A one-time payment cuts the balance at once, so it saves the most early in the loan. $10,000 paid now on the $300,000 loan saves $53,602 in interest and ends it 2 years 9 months early. Not all mortgages allow this without a fee, so check your loan documents for a prepayment penalty first.
“What if I put a $10,000 bonus toward my mortgage?”
On $300,000 at 6.5% with 30 years left, it saves $53,602 in interest. Try this scenario
Should I pay off my mortgage or invest?
It depends on whether your investments would beat your mortgage rate, and that isn’t guaranteed. Paying down a 6.5% mortgage is a certain 6.5% return. In the calculator’s comparison, investing the extra $200 a month instead only comes out ahead if investments earn more than about 6.7% a year, before tax.
That comparison is in the results: both paths spend the same money each month until your original payoff date. With a 3% mortgage and 7% returns, investing comes out about $103,000 ahead. Set the return under More options. Some reasons to invest first have nothing to do with rates:
- Liquidity. Money in your home is hard to get back out without selling or borrowing.
- A 401(k) match is an instant return no mortgage can beat.
- Higher-rate debt, like credit cards, should be paid first.
- Taxes. If you itemize, mortgage interest is deductible, which lowers its real cost. If you take the standard deduction, it doesn’t.
Mortgage payoff FAQ
Does paying extra lower my monthly payment?
No. Your required payment stays the same and the loan ends sooner. If you’d rather have a lower payment, some lenders will recast the loan after a large lump sum: they re-spread the smaller balance over the remaining term, usually for a small fee. Ask your servicer whether it offers recasting.
Do I need to tell my lender the extra is for principal?
Yes, it’s worth doing. Most servicers have a box or option for additional principal. Without it, some hold the extra or apply it to next month’s payment, which saves you nothing. Check your next statement to confirm the principal balance dropped by the extra amount.
Is it better to pay extra each month or once a year?
Monthly saves a little more, because each dollar starts saving interest sooner. On a $300,000, 30-year loan at 6.5%, $200 extra a month saves $103,449, while $2,400 once at the end of each year saves $99,670. The habit matters far more than the timing.
Is 50 a good age to pay off a mortgage?
Entering retirement without a mortgage lowers the income you need, so many people aim to pay it off by then. Just don’t do it at the cost of retirement savings: an employer 401(k) match and an emergency fund usually come first, and money in your home is hard to get back out.
The amortization method is on the methodology page. Buying a home rather than paying one off? Use the mortgage calculator.