Year-by-year balance for the regular schedule versus the same loan with your extra monthly payment, using the same amortization logic as the calculator above. The accelerated loan reaches zero sooner.
End of year
Balance (no extra)
Balance (with extra)
Year 1
$296,421
$293,942
Year 2
$292,583
$287,446
Year 3
$288,467
$280,481
Year 4
$284,054
$273,012
Year 5
$279,322
$265,004
Year 6
$274,248
$256,416
Year 7
$268,807
$247,207
Year 8
$262,973
$237,333
Year 9
$256,717
$226,745
Year 10
$250,009
$215,392
Year 11
$242,815
$203,218
Year 12
$235,102
$190,163
Year 13
$226,832
$176,165
Year 14
$217,963
$161,156
Year 15
$208,453
$145,061
Year 16
$198,256
$127,802
Year 17
$187,321
$109,296
Year 18
$175,597
$89,452
Year 19
$163,024
$68,174
Year 20
$149,543
$45,358
Year 21
$135,087
$20,892
Year 22
$119,586
Paid off
Year 23
$102,965
Paid off
Year 24
$85,142
Paid off
Year 25
$66,030
Paid off
Year 26
$45,537
Paid off
Year 27
$23,563
Paid off
Year 28
$0
Paid off
Estimates only — not financial, tax, or professional advice.
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What it calculates: Total Interest Saved, Months Paid Off Early, New Payoff Timeline (months), Interest Without Extra Payments.
$200 on top of a $2,039 payment saves $98,473 and six years two months
The default loan has $300,000 outstanding at 7% with 28 years to run. Left alone it costs $385,045 in interest. Adding $200 a month — under 10% more than the required payment — cuts the interest to $286,572 and clears the loan in 262 months instead of 336.
Extra payments reduce principal, cutting total interest and shortening amortization
The leverage looks surprising until you see where the money goes. An extra payment is applied entirely to principal, so it never buys interest; it removes it. Every dollar of principal retired early cancels all the future interest that dollar would have carried for the remaining term. On a 7% loan with 28 years left, one dollar paid today cancels roughly six dollars of future interest, which is why a small monthly addition compounds into a six-figure saving.
Early payments cancel more interest because they cancel more years of it
The saving is front-loaded. The extra $200 paid in month one avoids 27 years of interest on that amount; the same $200 paid in year twenty avoids eight. This is the mirror image of the amortisation schedule itself, where early payments are mostly interest precisely because the balance is largest.
Two practical consequences follow. Starting overpayments early matters much more than the amount, so $100 begun now typically beats $200 begun in five years. And a one-off lump sum applied early — a bonus, an inheritance — can be worth more than years of small additions, because it removes principal at the point where the remaining term is longest.
Overpaying a 7% mortgage is a guaranteed 7% return, which is the honest benchmark
Money used to overpay a mortgage earns exactly the mortgage rate, risk-free and tax-free in most jurisdictions that do not allow interest deduction. That is the number to compare against, and it is a high bar: a guaranteed 7% is better than most bond yields and competitive with long-run equity returns after risk is accounted for.
The case against is liquidity and sequencing. Money paid into a mortgage is very hard to retrieve without refinancing or selling, so overpaying before an emergency fund exists is fragile. Employer-matched retirement contributions are a guaranteed 50–100% return and should be exhausted first. And a mortgage at 3% is a different decision entirely from one at 7% — at low rates the arithmetic usually favours investing.
A lender that banks the extra as a prepaid instalment gives you none of this saving
The model assumes every extra dollar reduces the principal immediately. Not all servicers do that by default. Some apply a larger payment to the next month’s instalment instead, which means you have paid ahead rather than paid down, and the interest saving never materialises. Others hold extra funds in suspense until they total a full payment.
The fix is specific and worth doing in writing: instruct the servicer to apply additional amounts to principal, and check the next statement to confirm the balance fell by the full extra amount. Also check for prepayment penalties, which are rare on modern residential mortgages but not extinct, particularly on loans within their first few years.
One rate, one payment, and no change of circumstances for twenty-two years
The calculation assumes the interest rate is fixed for the remaining term and that the overpayment continues every month without interruption. On an adjustable-rate mortgage the saving would move with the rate. If the overpayments stop after a few years, the term shortens by far less than shown here.
The payment used is principal and interest only. Property tax, insurance and any mortgage insurance are outside it, so the figure will not match the total that leaves your account. Note also that reaching 20% equity sooner can let you cancel private mortgage insurance early — a real saving that this model does not count, and one that can make early overpayment more valuable than the interest figure alone suggests.
Frequently Asked Questions
Is it better to pay extra on the mortgage or invest?
It depends on your guaranteed mortgage rate versus your expected after-tax investment return. Paying down a mortgage is a risk-free return equal to the rate, while investing may earn more but is not guaranteed. Many people split the difference, and the emotional value of being debt-free also weighs in.
How do extra payments save so much interest?
Interest is charged on the outstanding balance. An extra payment reduces that balance immediately, so every future month accrues interest on a smaller amount. Early in the loan, when the balance is largest, that effect compounds into large savings over the remaining term.
Do extra payments lower my monthly payment?
No. On a standard mortgage, extra principal shortens the term rather than reducing the required monthly payment. You keep paying the same amount but finish sooner. To lower the payment itself you would need to refinance or ask about a recast.
What is a mortgage recast?
A recast re-amortizes your loan over the remaining term after you make a large lump-sum payment, which lowers the monthly payment while keeping the same rate and payoff date. It is different from extra monthly payments, which shorten the term instead.
Should I make sure the extra goes to principal?
Yes. Tell your servicer to apply any extra amount to principal, not to the next scheduled payment. If it is credited as a future payment instead, you will not get the interest-saving benefit this calculator assumes.
Are there prepayment penalties?
Most modern mortgages allow extra payments freely, but some loans charge a penalty for paying off early within a set window. Check your loan documents or ask your servicer before committing to a payoff strategy.
Sources & References
Figures on this page are checked against primary, authoritative sources. Links open in a new tab.
Results are estimates based on the figures you enter and standard formulas. Rates, fees, taxes, and lender terms vary and change over time, so confirm important numbers with your lender or a qualified professional. This is educational information, not financial advice.
Published the calculator with its formula, worked example, assumptions, limitations and FAQs, and added an automated formula test suite covering it.
Fixed an off-by-one in the shortened-term solve that reported minus one month saved when no extra payment was entered, and confirmed by simulation that the solved payoff month is the first one that actually clears the balance.
Frequently Asked Questions now show on the page: 6 answers, checked in a page-by-page audit.
What the calculation assumes and where it stops now show on the page.
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