How Extra Mortgage Payments Save You Money

How adding even a small extra amount to your monthly mortgage payment cuts years off your loan and saves tens of thousands in interest, with a full worked example.

Any amount paid beyond your required monthly payment goes entirely toward your principal balance — and because interest is recalculated on that lower balance every month afterward, extra payments save more than their face value in interest over time.

Worked example

A $300,000 loan at 6% over 30 years has a required payment of $1,798.65/month and would normally cost $347,514.57 in total interest. Adding just $150 extra per month pays the loan off in about 24 years 7 months instead of 30 years — 5 years 5 months earlier — while paying only $273,806.95 in interest, a savings of roughly $73,708.

Why timing matters

Extra payments made earlier in the loan save more than the same extra payments made later, because they eliminate interest on a larger remaining balance for a longer stretch of time. A consistent, modest extra payment sustained from early in the loan typically outperforms a single larger lump sum paid years later.

Things to confirm with your lender first

• Make sure extra payments are applied to principal, not held as a credit toward next month's payment.
• Check for any prepayment penalty, though these are rare on standard conventional mortgages today.
• If you have PMI, ask your lender how extra principal payments affect when it can be removed.

Enter your own loan amount, rate, and an extra monthly payment amount into the Mortgage & Loan Calculator to see your exact new payoff date and total interest saved.