Extra Payment Calculator

Why a small amount does so much

A dollar of principal removed today stops accruing interest for every month left in the term. Remove it in year one of a thirty-year loan and it saves twenty-nine years of compounding. Remove the same dollar in year twenty-eight and it saves two years.

That is the entire mechanism, and it is why the saving looks wildly out of proportion to the amount sent. It is also why an extra payment schedule that starts late does a small fraction of what the same money would have done early.

How this page works it out

Not with a formula. The loan is walked month by month at the scheduled payment plus the extra, with the balance recomputed each time and the final payment trimmed to whatever is actually left. Closed forms for early payoff exist and they disagree with a real schedule at the edges, particularly on the last month.

each month: balance −= (payment + extra) − balance × rate ÷ 12

Three things that go wrong in practice

The servicer applies it to next month instead

This is the common one. Money arriving above the scheduled amount is often held and applied to the following payment, which advances your due date and does nothing to the balance. Most servicers have a principal-only field or an instruction you can set once. Check the first statement after you start, and confirm the balance actually moved.

The payment does not go down

It cannot. The payment is fixed by the note, so extra principal shortens the loan rather than shrinking the monthly obligation. Some lenders will recast a loan after a large lump sum, which does lower the payment, but it has to be requested and it usually carries a fee.

There is a prepayment penalty

Rare on modern owner-occupied mortgages, still present on some investor and non-qualified loans. It is one clause in the note. A penalty measured against the balance can wipe out a year of extra payments, so it is worth reading before starting rather than after.

Against investing the difference

Paying down a mortgage returns exactly the rate on the loan, with no market risk and nothing owed on the gain. An investment might beat it and might not. The honest comparison is your rate against what you would realistically earn after tax, plus a weighting for how much you value owing nobody anything, which is not a number but is not nothing either.

What each extra amount saves

Frequently asked questions

Why does a small extra amount do so much?

Because a dollar of principal removed today stops accruing interest for every month left in the term. The same dollar paid in year twenty-five saves a few months of interest. Early extra payments are worth several times what late ones are, which is why the saving looks out of proportion to the amount.

Is it better than investing the difference?

Paying down a mortgage returns exactly the rate on it, with no market risk and nothing owed on the gain. An investment might do better and might not. The honest comparison is your mortgage rate against what you would actually earn after tax, plus how much you value not owing anybody.

Will my payment go down?

No. The payment is fixed by the note, so extra principal shortens the loan rather than shrinking the monthly obligation. Some servicers will recast a loan after a large lump sum, which does lower the payment, but it usually costs a fee and has to be asked for.

Is there a prepayment penalty?

On most modern owner-occupied mortgages, no. They still exist on some non-qualified and investor loans. It is one line in your note, and worth reading before you start, because a penalty measured against the balance can undo a year of extra payments.

Sources

• Freddie Mac Primary Mortgage Market Survey, national weekly average mortgage rates, retrieved 2026-08-24