An extra $100/month on a typical mortgage saves $77,000+ in interest and cuts nearly 5 years off your payoff date. The math is surprisingly powerful because mortgages are long and interest compounds over decades.
Understanding how extra payments work helps with planning. Even small additional amounts create large differences over a 30-year loan term - differences that grow more significant the earlier in the loan they occur.
Calculate it: The Mortgage Payment Calculator shows your monthly payment breakdown and how different loan amounts affect costs - no signup required.
Why Early Payments Matter
Mortgages are front-loaded with interest. Here’s what that looks like on a $300,000 loan at 6.5%: In month 1, a $1,896 payment splits into $1,625 interest and just $271 principal. By month 120 (year 10), the same $1,896 payment splits differently - $1,336 interest and $560 principal.
Extra payments early reduce principal, which means less interest accrues on every payment that follows. A $100 extra payment in year 1 saves more interest than the same $100 in year 15 because it compounds for longer. This is why understanding the math encourages action sooner rather than later.
Extra Payment Impact: $300,000 at 6.5%
Concrete numbers illustrate the power of extra payments better than abstract percentages:
| Scenario | Payoff Time | Total Interest | Savings |
|---|---|---|---|
| Standard | 30 years | $382,633 | - |
| +$100/month | 25.4 years | $305,145 | $77,488 |
| +$300/month | 21.1 years | $238,147 | $144,486 |
| +1 payment/year | 25.5 years | $305,539 | $77,094 |
The $100/month scenario saves over $77,000 and cuts 4.6 years off the mortgage. Increasing to $300/month nearly triples the savings. One extra payment per year achieves similar results to $100/month extra - useful for those who prefer lump sums over steady increases.
Biweekly Payments
Biweekly payments work by paying half your monthly payment every two weeks instead of once monthly. The math creates a natural extra payment: 52 weeks divided by 2 equals 26 half-payments, which equals 13 full payments per year instead of 12.
The impact matches making one extra payment annually - around $77,000 saved on a $300,000 mortgage. Some servicers charge for formal biweekly programs, which may not be worth the fee. One alternative approach is making extra principal payments yourself, achieving the same result without program fees.
Lump Sum Impact by Timing
Lump sums - from tax refunds, bonuses, or inheritance - can make a significant dent. But timing matters enormously. A $5,000 lump sum on a 30-year mortgage at 6.5% saves vastly different amounts depending on when it’s applied:
| Timing | Interest Saved |
|---|---|
| Year 1 | ~$17,000 |
| Year 5 | ~$14,000 |
| Year 10 | ~$10,000 |
| Year 20 | ~$4,000 |
The same $5,000 saves four times more interest in year 1 than in year 20. This illustrates why earlier action on mortgage payoff creates outsized benefits compared to waiting.
Key Formulas
Two formulas help calculate the impact of different extra payment amounts in Google Sheets.
Months to payoff with extra payments uses: =NPER(Rate/12, -(StandardPayment + ExtraMonthly), Balance). This tells you exactly how long the loan will take at your proposed payment level.
Interest saved compares the totals: =StandardTotalInterest - AcceleratedTotalInterest. Running these calculations for different extra payment amounts helps identify the sweet spot for your budget.
When to Pay Extra
Extra mortgage payments make more sense in certain situations. Approaching retirement, having a high mortgage rate (7%+), valuing the peace of mind from owning outright, or having a risk-averse preference all point toward accelerated payoff.
Investing instead might make more sense with a mortgage rate below 5-6%, retirement accounts not yet maxed, no emergency fund in place, or higher-interest debt that costs more than the mortgage. The trade-off comes down to a 6.5% guaranteed return (mortgage payoff) versus an uncertain 8-10% (market returns). Risk tolerance and personal circumstances matter as much as pure math.
If your rate is high compared to current offerings, refinancing might be worth exploring before committing to extra payments. The Mortgage Refinance Calculator shows whether refinancing saves money after accounting for closing costs.
Common Questions
Extra payments don’t lower your monthly required payment - they reduce principal and shorten the loan term. The payment amount stays the same; you just make fewer of them.
If selling within 5 years, extra payments may not make as much sense since you’ll recover the equity anyway at sale. The interest savings are smaller over a short period.
Most modern mortgages don’t have prepayment penalties, but checking your documents confirms this for your specific loan.
When choosing between extra payments and building an emergency fund, having some emergency savings first typically makes sense. Without savings, emergencies often go on credit cards at 20%+ interest - more expensive than any mortgage.
Related
- Mortgage Payment Calculator - calculate monthly payments for different loan amounts and rates
- Mortgage Refinance Calculator - see if refinancing saves money at current rates
- Home Affordability Calculator - estimate how much house fits your budget
- Financial Planning Template - project mortgage payoff alongside retirement planning
- Net Worth Tracker - track how mortgage payoff builds equity
- Annual Budget Template - plan extra payments across the year
- Emergency Fund Calculator
- Debt Snowball vs. Debt Avalanche