Mortgage Payoff Calculator

How extra payments create savings

Every month, interest is charged on the outstanding balance. Paying extra reduces that balance immediately, so every future month charges interest on a smaller number - and because the payment stays fixed, the extra keeps coming out of your pocket for fewer months as the loan empties faster. The result is a payoff date that moves up and an interest total that falls.

That is why an extra payment in year two is worth much more than the same payment in year twenty: the earlier payment removes interest for more months. On a 30-year mortgage around $300,000 at 6.5%, a steady $200 a month can take several years off the payoff date and save tens of thousands of dollars in interest. The page recalculates the schedule month by month with every input change, so the figure it prints is the compounded consequence of a smaller balance, not a simple subtraction.

Monthly extra versus a lump sum

A recurring extra payment keeps working for the whole life of the loan and is easy to set up through your servicer or bill-pay. A lump sum, such as an annual bonus or a tax refund, produces a similar effect concentrated at one point in time - a single larger principal reduction that cuts every following month’s interest at once.

Use both fields to model a realistic plan: a modest monthly amount plus whatever you can add once a year. The tool applies the annual amount on every twelfth payment, which is how lenders usually process anniversary payments, so the annual extra lands on the same month each year rather than being spread across the schedule.

Which one is cheaper for you depends on cash flow and discipline: a monthly extra keeps the money out of reach and smooths the saving, while an annual lump sum keeps it liquid through the year and lets you deploy the money when the bonus actually arrives.

Before you pay extra, check three things

Confirm there is no prepayment penalty on your loan, that the extra money is applied to principal rather than to next month’s payment, and that you are not giving up an employer retirement match or a higher-yield savings account to do it. The extra dollars are worth the mortgage interest they avoid - and that return only wins if nothing else you could do with the money pays more.

The mechanics matter as much as the math. Because interest is computed on the outstanding balance each month, an extra payment sent near the due date can be applied to next month’s payment instead of principal unless you ask for a principal-only application. Set that up once, then check the first statement to confirm the balance actually dropped.

What the payoff date does not count

A shorter payoff date assumes the rate and the terms stay exactly as entered: it does not include a prepayment penalty if your loan has one, a change in your payment schedule, or the effect of refinancing partway through. Those are real-world detours, not arithmetic errors.

Treat the result as the best case for the inputs you entered. Running the same extra payment against a higher balance, a longer remaining term or a different rate shows how quickly the saving moves either way.