Extra Payment Calculator
See how extra monthly, annual, or one-time payments shorten your mortgage and reduce total interest paid.
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How It Works
Extra mortgage payments reduce your principal balance faster, which means less interest accrues each month. Whether you add a fixed amount monthly, make an annual lump sum, or apply a one-time windfall, even modest additional payments can shave years off your mortgage and save tens of thousands in interest.
The Formula
Principal = Base Payment - Interest + Extra Monthly
New Balance = Balance - Principal
Every 12 months: New Balance = Balance - Extra Annual
Variables
- M — Standard monthly mortgage payment
- Extra Monthly — Additional principal added each month
- Extra Annual — Lump sum principal added once per year
- One-Time — Single lump sum applied immediately to principal
Worked Example
On a $280,000 loan at 6.5% with 28 years remaining, the monthly payment is about $1,840. Adding $200/month extra reduces the payoff to roughly 21 years, saving about 7 years and over $100,000 in interest.
Practical Tips
- Always confirm with your lender that extra payments are applied to principal, not held as prepayment for the next month.
- Extra payments early in the loan save more interest than extra payments later because the balance is higher and compounds longer.
- If you have high-interest debt (credit cards, personal loans), pay those off before making extra mortgage payments.
- Some mortgages have prepayment penalties, especially in the first 3-5 years. Check your loan terms before committing to extra payments.
- Even rounding up your payment to the nearest $100 can save thousands in interest and months on your loan term.
Frequently Asked Questions
Should I make extra mortgage payments or invest the money instead?
This depends on your mortgage rate versus expected investment returns. If your mortgage rate is 6-7% and you expect stock market returns of 8-10%, investing might yield more over time. However, paying off your mortgage is a guaranteed return equal to your interest rate, with zero risk. Many people do both: max out tax-advantaged retirement accounts first, then put remaining funds toward extra mortgage payments.
Is a one-time lump sum better than spreading extra payments monthly?
A lump sum applied today saves slightly more interest than the same total spread over 12 months, because it reduces the balance immediately. However, spreading extra payments monthly is more manageable for most budgets and still provides substantial savings. The most important thing is consistency, not timing.
Can my lender refuse to accept extra principal payments?
Lenders generally cannot refuse principal prepayments on residential mortgages originated after 2014 (under the Dodd-Frank Act). However, some older loans and certain types of mortgages may have prepayment penalties. Read your loan documents or call your servicer to confirm. If there is a penalty, it typically applies only in the first few years.
Do I need to specify that extra payments go to principal?
Yes. When making extra payments, explicitly mark them as additional principal. If you simply send a larger check without instructions, some servicers may apply the extra amount toward next month payment or put it in escrow. Most online payment portals have a separate field for additional principal. Always verify the payment was applied correctly on your next statement.
Will extra payments lower my monthly payment amount?
No. Your required monthly payment stays the same regardless of extra payments. What changes is the payoff date and total interest. However, if you pay down a significant amount and then refinance, your new payment would be based on the lower balance. Some lenders offer a recast option where they recalculate your payment based on the reduced balance for a small fee.