Why extra principal is so powerful
A mortgage front-loads interest: in the early years, most of each payment covers interest and only a sliver reduces the balance. Every extra dollar you send goes entirely to principal, permanently removing all the future interest that dollar would have accrued. Because the effect compounds over the remaining decades, small extra payments produce outsized savings.
A concrete example
On a $300,000 mortgage at 6.5% over 30 years, the normal payment is about $1,896. Add just $200/month and you'll pay the loan off roughly 6 years early and save over $100,000 in interest. The extra $200 isn't earning a return in the usual sense — it's guaranteeing you avoid 6.5% interest, a risk-free return most investments can't promise.
Ways to add extra
- Fixed monthly extra (this calculator) — simplest and easiest to automate.
- Biweekly payments — paying half the payment every two weeks sneaks in one extra full payment per year; see our biweekly mortgage calculator.
- Lump sums — applying tax refunds or bonuses directly to principal.
Should you? The trade-off
Prepaying a mortgage is a guaranteed return equal to your rate — compelling when rates are high. But weigh it against alternatives: capture any employer retirement match first, clear higher-rate debt (credit cards) before the mortgage, and keep an emergency fund, since money sent to the mortgage is hard to get back. Confirm your lender applies extra payments to principal, and check for any (rare) prepayment penalty.