How paying a mortgage off early works
Every mortgage payment covers the interest charged that month first. Whatever is left repays principal. When you send extra money marked “principal only”, it goes straight to the balance. A lower balance means less interest next month, so more of each regular payment repays principal, and the loan ends sooner. Your regular payment does not change. The loan simply runs out of balance early.
This calculator starts from where you are today, not from the day you took out the loan. You can describe your loan in either of two ways:
- Original loan details: the amount you borrowed, the original term and how long you have been paying. The calculator rebuilds your balance from the original schedule.
- Current balance: the balance on your latest statement and your monthly principal and interest payment. The calculator works out how many payments you have left.
Then pick a strategy: extra payments (monthly, yearly or a one-time lump sum), biweekly payments, or a target payoff date.
The formulas
Your balance after k payments on the original schedule:
P = original loan · M = monthly payment · r = yearly rate ÷ 12 · k = payments made
The number of payments left at a given payment:
Raise M with an extra amount and n falls. To hit a target, the calculator solves the payment that clears B in your chosen number of months, M′ = B × r ÷ (1 − (1 + r)^−n), and shows the difference M′ − M as the extra you need each month. Yearly and one-time payments are applied in the month you choose, and the full schedule is rebuilt month by month.
Worked example 1: five years into a 30-year loan
You borrowed $300,000 at 6.5% for 30 years and have made 60 payments.
- Monthly principal and interest: $1,896.20
- Balance today: $280,832.93 (only $19,167 repaid so far)
- Interest already paid: $94,605.18
- On the current schedule you have 300 payments left and $288,028.29 of interest still to pay
Here is what different strategies do from today:
| Strategy | Payoff after | Time saved | Interest saved |
|---|---|---|---|
| Nothing extra | 300 payments (25 years) | — | — |
| $100 extra a month | 266 payments | 2 years 10 months | $38,354.51 |
| $200 extra a month | 240 payments | 5 years | $66,943.94 |
| $500 extra a month | 187 payments | 9 years 5 months | $122,009.38 |
| Biweekly (13 payments a year) | 250 payments | 4 years 2 months | $55,860.74 |
| $5,000 every year | 203 payments | 8 years 1 month | $105,454.61 |
| $20,000 lump sum now | 254 payments | 3 years 10 months | $68,650.50 |
To be mortgage-free in 15 years instead of 25, you would need $550.15 extra a month. That saves $128,517.08 of interest.
Notice the $20,000 lump sum saves slightly more interest than $200 a month for 20 years ($48,000 in total), even though it adds less money. Money paid early has more months to stop interest building up.
Worked example 2: starting from your statement
Your statement shows a balance of $250,000 at 6.5%, and your principal and interest payment is $1,800.
- Payments left: n = −ln(1 − 250,000 × 0.0054167 ÷ 1,800) ÷ ln(1.0054167) = 259 payments (21 years 7 months), the last one smaller
- Interest still to pay: $215,023.54
- To finish in 10 years, pay $1,038.70 extra a month ($2,838.70 in total). That saves $124,379.61 of interest.
If your statement payment includes escrow for property tax and insurance, subtract that part first. Only principal and interest pay down the loan.
Worked example 3: biweekly payments on a new loan
Paying half of your monthly payment every two weeks gives 26 half-payments a year, which is 13 full payments instead of 12. On a new $300,000 loan at 6.5% for 30 years:
- Monthly payment: $1,896.20, so the biweekly plan adds the equivalent of $158.02 a month
- Payoff: 290 payments (24 years 2 months) instead of 360
- Interest saved: $87,256.29
The calculator models this as one twelfth of a payment added to each monthly payment, with interest charged monthly. That matches how most US servicers credit biweekly plans: they hold the half-payments and apply them monthly. If your servicer applies each half-payment on the day it arrives, you save a little more. Either way, you can get the same result without signing up for a biweekly program: just add one twelfth of your payment each month.
Mortgage payoff strategies compared
| Strategy | Good for | Watch out for |
|---|---|---|
| Fixed extra every month | Steady incomes; easy to automate | Make sure it is applied to principal |
| Yearly lump sum | Bonuses, tax refunds | Pay it early in the year to save more |
| One-time lump sum | Inheritance, sale of an asset | Keep your emergency fund intact |
| Biweekly payments | People paid every two weeks | Third-party programs that charge setup fees |
| Pay off by a date | Retirement or a child’s college start | The extra needed rises sharply for short targets |
| Refinance to a shorter term | When rates have fallen | Closing costs; see the refinance calculator |
| Recast after a lump sum | Lowering the monthly payment | Recasting does not shorten the term on its own |
Tips
- Start early. Interest is front-loaded, so an extra $100 in year 2 saves far more than an extra $100 in year 25. Open the payoff schedule above and compare the interest column with and without extra payments.
- Mark extra payments “principal only”. Without that instruction, some servicers hold the money as an advance on next month’s payment, which saves nothing.
- Check for a prepayment penalty. The CFPB explains that most mortgages have none, and where one is allowed, federal rules limit it to the first three years of certain fixed-rate loans. Your Closing Disclosure says whether your loan has one.
- Mind PMI. If you pay private mortgage insurance, extra payments also bring forward the date you can ask to cancel it, at 80% of the original home value. The mortgage calculator models PMI.
- Keep a cushion. Money paid into a home is hard to get back out. Build an emergency fund first.
Common mistakes
- Entering the full payment including escrow. Property tax, insurance and PMI collected with your payment do not reduce the balance. Use principal and interest only.
- Using the original term as the time left. If you are 7 years into a 30-year loan, you have 23 years left. Use the time already paid, or switch to the current-balance view.
- Ignoring the opportunity cost. Prepaying earns a sure return equal to your mortgage rate. If you have credit card debt at 22%, paying that off first saves more. The compound interest calculator shows what the same money could grow to if invested.
- Draining savings for a lump sum. You cannot borrow it back easily. A HELOC is the usual way to tap home equity again, and it comes with its own interest rate.
Is paying off a mortgage early worth it?
It depends on your rate, your other debts and your goals. Paying extra is a guaranteed, risk-free return equal to your mortgage rate, and many people value the security of owning their home outright, especially before retirement. On the other hand, a low-rate mortgage can be cheap money, and retirement accounts can offer tax breaks and employer matches that prepaying cannot. A common order is: emergency fund, employer match, high-interest debt, then extra mortgage payments or investing.
Results here assume a fixed rate and that each extra payment is applied to principal in the month you make it. Your servicer’s payoff quote will include interest accrued to the payoff date, so it can differ slightly from the balance shown in the schedule.