Mortgage Tools
Mortgage Payoff Calculator
See how extra monthly payments shorten your loan and cut total interest. Calculate new payoff date in seconds.
Mortgage Payoff Details
Amount above your regular P&I
Interest Saved
$0
Insights
How Extra Payments Work
When you take out a 30-year or 15-year mortgage, your regular monthly payment is calculated to cover both the interest accrued that month and a portion of the principal balance (amortization). In the early years of a mortgage, the vast majority of your monthly payment goes toward interest rather than principal.
By adding an extra monthly payment directly to your principal balance, you immediately reduce the amount upon which future interest is calculated. Because interest is compounded monthly against the remaining balance, reducing that balance sooner creates a cascading compounding savings effect over time.
Even modest extra payments—such as an extra $100 or $200 each month—can shave several years off a 30-year mortgage and save tens of thousands of dollars in interest charges, allowing you to achieve complete debt freedom much faster.
Where to Send Extra Payments (Principal vs Escrow)
When making extra mortgage payments, it is critical to instruct your loan servicer explicitly on how the funds should be applied. Extra money should always be designated as "Principal Reduction."
If you do not specify principal reduction, some servicers might hold the extra funds as a prepayment toward your next month's regular payment or apply them toward your escrow account (which pays property taxes and homeowners insurance). Escrow funds do not reduce your loan balance and do not save you on interest charges. Always verify your monthly statement to ensure extra funds are credited directly to principal.
Frequently asked questions
How much does an extra $200 save on a mortgage?
On a $320,000 mortgage at 6.76% interest with 25 years remaining, adding an extra $200 per month to your principal payment cuts years off your loan and saves tens of thousands of dollars in total interest over the life of the loan.
Should I pay extra on principal or escrow?
Always specify that extra payments apply strictly to your loan principal. Escrow covers property taxes and insurance, which do not reduce your loan balance or lower future interest charges.
Is it better to pay off mortgage early or invest?
It depends on your mortgage interest rate versus your expected investment returns. If your mortgage rate is high (e.g. 6.76% in 2026), paying down principal gives a guaranteed risk-free return equal to your interest rate. If investment returns outpace your mortgage rate, investing extra cash may yield higher long-term wealth.
Does paying extra hurt my credit?
No, paying extra on your mortgage does not hurt your credit score. In fact, lowering your overall debt balance can improve your credit utilization ratio and financial health over time.
Can I make biweekly payments instead of extra monthly?
Yes! Making half-payments every two weeks results in 26 half-payments per year—equivalent to 13 full monthly payments instead of 12. This extra payment per year accelerates payoff similarly to making a monthly extra payment.