Mortgage Extra Payment Calculator – Early Payoff & Amortization Schedule
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Why Make Extra Mortgage Prepayments?
On a traditional 30-year fixed-rate mortgage, the majority of your early monthly payments go straight toward interest rather than paying down principal. By contributing extra funds directly toward the loan principal—either monthly, annually, or as a one-time bonus—every extra dollar reduces the compounding interest calculated in all future months.
How Much Can You Save?
Adding just $250 per month to a $400,000 mortgage at 6.5% interest shaves over 6.5 years off your loan repayment schedule and saves more than $100,000 in total interest charges.
Prepayment Strategies Compared
- Extra Monthly Prepayments: Easiest to automate alongside your regular salary budget. Steadily accelerates loan amortization every 30 days.
- Annual Lump Sums: Ideal for utilizing tax refunds, year-end corporate performance bonuses, or holiday dividends.
- One-Time Principal Reductions: Apply inheritance, stock option liquidation, or home equity windfall directly to wipe out years of interest accrual.
Frequently asked questions
Does an extra payment go directly to principal?
Yes, as long as you designate the extra funds as 'Principal Prepayment' with your mortgage servicer. Standard loan agreements allow unlimited fee-free principal reductions under US and international lending laws.
What is the difference between recasting and paying off early?
Making extra payments shortens your loan term and cuts total interest, but keeps your scheduled monthly bill the same. Mortgage recasting re-amortizes the remaining lower balance to reduce your monthly payment while keeping the original maturity date.
Should I pay off my mortgage early or invest in index funds?
It depends on your interest rate versus expected post-tax investment returns. When mortgage rates are 6% to 7%+, paying down the mortgage provides an effective, risk-free 6%–7% return on capital with zero market volatility.
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