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Financial · Live

Pay your mortgage off, years sooner.

See exactly how much time and money an extra principal payment shaves off your mortgage. Punch in your balance, rate, remaining term, and extra monthly amount to get the new payoff date, the years saved, and the total interest you avoid paying. Side-by-side comparison with the current plan.

Pay off vs. investReal-time

Inputs

Loan + extra payment

$
%
yr
$

Try a preset extra payment

Scheduled P&I
$2,294.44
Actual payment
$2,494.44
Effective rate
6.5%

With +$200/month

Total savings

$84,371

Total interest saved by adding $200 every month.

4 years 11 months earlierTerm cut by 18%21% less interest
New payoff
Jun 2048
Monday
Years saved
4.9
59 months

Side by side

Current plan vs. early payoff

Live
Current plan
May 2053

Payoff in 27 years.

Monthly payment
$2,294.44
Total interest
$393,399
Total of payments
$743,399
Early payoff plan
Jun 2048

Payoff in 22 years 1 month.

Monthly payment
$2,494.44
Total interest
$309,028
Total of payments
$659,028

Timeline

Years to payoff

27y → 22.1y
TodayJun 2048May 2053
Current plan27 years
Early payoff22 years 1 month
4 years 11 months (18%) knocked off the original term — payoff date moves from Thu, May 15, 2053 to Mon, June 15, 2048.
Scheduled P&I
$2,294.44
27 yr · 6.5%
Extra each month
+$200.00
Applied to principal
Total interest saved
$84,371
21% of original interest

Decision guide

Should you pay off your mortgage or invest?

The most common “extra dollar” question in personal finance: pay down the house, or put the money into the market? There's no universal answer, but there is a defensible decision tree.

  1. Tip 1

    Compare the rate, not the dollar amount

    Your mortgage rate is a guaranteed return on every extra dollar of principal, risk-free. A 6.5% mortgage means an extra payment 'returns' 6.5% guaranteed. To beat that with investing, you need a higher long-run after-tax expected return on equivalent risk.

  2. Tip 2

    Don't skip the 401(k) match first

    Before even considering extra mortgage payments, capture every dollar of your employer's 401(k) match; that's typically a 50–100% immediate return on contribution. No mortgage rate matches a free dollar-for-dollar match.

  3. Tip 3

    Keep a 6-month emergency fund

    Don't pay your mortgage down so aggressively that you can't cover a job loss or car emergency without going into card debt at 22% APR. Liquidity matters; a paid-down mortgage is illiquid until you sell or refinance.

  4. Tip 4

    Behavioural value of a paid-off house

    Even when the spreadsheet favours investing, many people sleep better with no mortgage. A paid-off home cuts retirement spending dramatically and de-risks late-career layoffs. That's a legitimate input, just be honest that it's behavioural, not mathematical.

A quick rule of thumb. If your mortgage rate is below your long-run expected after-tax investment return (often 5–7% for a diversified stock portfolio), the spreadsheet favours investing — especially in tax-advantaged accounts (401(k), Roth IRA). If your mortgage rate is at or above that range, the guaranteed return of paying it down is hard to beat. Above 7%, paying down is almost always the right call. The calculator above tells you the dollar size of the prize; this section helps you decide whether to claim it.

Field guide

How extra principal payments work.

A fixed-rate mortgage charges interest on the current outstanding balance, recomputed every month. Your scheduled payment is a constant amount, but the split between interest and principal shifts over time: early on, most of the payment goes to interest; late in the loan, almost all of it goes to principal. The magic of an extra payment is that it shrinks the balance the next month's interest is charged on, saving compound interest for every remaining month of the loan.

The amortisation formula

Every fixed-rate mortgage uses the same formula for the scheduled monthly P&I:

r = APR ÷ 12 ÷ 100
P = B · r · (1 + r)n ⁄ ((1 + r)n − 1)

Where B is the current balance, r is the monthly rate, and n is the number of remaining months. For a $350,000 balance at 6.5% with 27 years remaining, that works out to about $2,213.40/month in P&I.

What happens when you add extra principal

The extra payment doesn't change the formula — it's applied after the scheduled split, as an additional principal-only reduction. Each month:

interesti = balancei · r
principali = scheduledPmt + extra − interesti
balancei+1 = balancei − principali

Because the new balance is smaller, the next month's interest is smaller too and that effect compounds across every remaining month. That's why $200/month of extra principal can save $100,000+ on a typical 30-year loan: the same $200 reduces interest charges on every future month.

How to make extra payments stick

Most servicers default to applying any extra money to next month's scheduled payment, not to principal. That delays your payment instead of reducing interest. Always:

  • Use the lender portal's “Apply to principal” or “Principal only” field, not the standard monthly payment field.
  • For mailed cheques, write “Principal only” in the memo line and on a cover letter.
  • Confirm the next month's statement shows the expected balance reduction. If the servicer botched it, call to have it corrected.

Strategies that work

  • Round up. Pay $2,500 instead of $2,213 every month. Painless way to add ~$300 of principal that compounds aggressively.
  • Biweekly schedule. Pay half your monthly amount every two weeks. 26 half-payments = 13 full payments per year, one “extra” per year that shaves 4–6 years off a 30-year loan.
  • Bonus / tax-refund lump sums. Direct irregular income (annual bonus, tax refund, equity vest) to principal. A single $10,000 lump sum on a 6.5% loan with 27 years to go saves about $33,000 in interest.
  • Recast after a lump sum. If you put a big chunk down, ask your lender about recasting, re-amortising the loan at the lower balance keeps the same payoff date but lowers the monthly payment, freeing cash flow.

Worked example

A homeowner has a 30-year fixed at 6.5%, three years in, with a current balance of $350,000 and 27 years left. Scheduled P&I: about $2,213/month. They add $200 extra to principal each month starting today.

  • Original payoff: ~27 years from now, with ~$367,000 in remaining interest.
  • New payoff: ~22 years from now, with ~$252,000 in remaining interest.
  • Net result: ~5 years off the calendar, ~$115,000 saved.

Run the exact numbers in the calculator above; the math here is for orientation only.

When NOT to make extra payments

  • Before fully funding your 401(k) match. An employer match is a 50–100% return on contribution. Nothing your mortgage charges can compete with that.
  • Before clearing high-interest debt. Credit-card APRs (18–25%) and consumer-loan rates dominate any mortgage rate.
  • Without an emergency fund. 3–6 months of core expenses in liquid savings should come first. Money in your house is illiquid.
  • If your mortgage rate is below 4%. The market has historically beaten that comfortably; tax advantages of mortgage interest only widen the gap.

Disclaimer

This calculator models a fixed-rate fully-amortising mortgage with a constant monthly extra payment, and ignores property taxes, homeowners insurance, PMI, HOA fees, and the time value of those escrow components. Calculations are educational estimates and are not financial, accounting, or tax advice. Confirm specifics with your loan servicer or a licensed professional before making large prepayments.