● Money & small business
How much does an extra mortgage payment save? $100 to $1,000 a month on a $300,000 loan
Every extra dollar you pay on a mortgage goes straight to principal, and a smaller balance means less interest every month after that. The effect compounds, so small extras add up to large savings. Below: exactly how much, on a $300,000, 30-year loan at three interest rates. The figures come from the same month-by-month model as our tested mortgage spreadsheet: interest is the balance × rate ÷ 12, rounded to the cent. Try your own numbers with the mortgage extra payment calculator.
Extra every month, $300,000 over 30 years
| Rate | Extra per month | Paid off in | Interest saved | Time saved |
|---|---|---|---|---|
| 6.0% | none ($1,798.65 P&I) | 30 yr 0 mo | – ($347,515.44 total) | – |
| 6.0% | $100 | 26 yr 1 mo | $53,346.83 | 3 yr 11 mo |
| 6.0% | $200 | 23 yr 3 mo | $91,173.87 | 6 yr 9 mo |
| 6.0% | $500 | 17 yr 8 mo | $160,295.67 | 12 yr 4 mo |
| 6.0% | $1,000 | 12 yr 10 mo | $216,674.13 | 17 yr 2 mo |
| 6.5% | none ($1,896.20 P&I) | 30 yr 0 mo | – ($382,636.71 total) | – |
| 6.5% | $100 | 26 yr 0 mo | $60,995.81 | 4 yr 0 mo |
| 6.5% | $200 | 23 yr 1 mo | $103,450.19 | 6 yr 11 mo |
| 6.5% | $500 | 17 yr 6 mo | $179,761.68 | 12 yr 6 mo |
| 6.5% | $1,000 | 12 yr 9 mo | $241,165.01 | 17 yr 3 mo |
| 7.0% | none ($1,995.91 P&I) | 30 yr 0 mo | – ($418,524.05 total) | – |
| 7.0% | $100 | 25 yr 10 mo | $69,336.71 | 4 yr 2 mo |
| 7.0% | $200 | 22 yr 11 mo | $116,638.28 | 7 yr 1 mo |
| 7.0% | $500 | 17 yr 4 mo | $200,233.28 | 12 yr 8 mo |
| 7.0% | $1,000 | 12 yr 7 mo | $266,600.12 | 17 yr 5 mo |
The higher the rate, the more each extra dollar saves, because it avoids more interest. The first $100 does the most work per dollar: at 6.5%, $100 a month saves about $61,000, while going from $500 to $1,000 a month adds about $61,400 more.
Monthly, yearly, biweekly or a lump sum?
The same loan at 6.5%, with different ways of paying extra:
| How you pay extra | Extra per year | Interest saved | Time saved |
|---|---|---|---|
| $200 every month | $2,400 | $103,450.19 | 6 yr 11 mo |
| $2,400 once a year (with every 12th payment) | $2,400 | $99,672.24 | 6 yr 9 mo |
| Biweekly-style: 1/12 of a payment ($158.02) added monthly | $1,896.24 | $87,259.03 | 5 yr 10 mo |
| $10,000 lump sum now | once | $53,602.60 | 2 yr 9 mo |
| $10,000 lump sum in year 11 (payment 121) | once | $24,692.90 | 1 yr 6 mo |
- Sooner beats later. The same $2,400 a year saves $3,778 more when paid monthly than in one payment at the end of each year, because each dollar starts cutting interest earlier. A $10,000 lump sum saves more than twice as much at the start of the loan as ten years in.
- Biweekly is just one extra payment a year. Paying half your payment every two weeks makes 26 half-payments, or 13 full payments a year. You get the same effect by adding 1/12 of a payment each month, without signing up for a biweekly program (some charge fees for it).
- Your monthly payment doesn't go down. Extra payments shorten the loan; the required payment stays the same unless your lender recasts the loan, which some do for a fee after a large lump sum.
Before you pay extra
- Ask your lender to apply extra payments to principal, not to next month's payment, and check your statement to confirm it happened.
- Check for a prepayment penalty. Most standard US mortgages don't have one, but some loans do.
- Paying extra on a mortgage is a guaranteed return equal to its rate. Higher-interest debt, like a credit card at 20% or more, usually comes first, and so does an emergency fund, because money paid into a house is hard to get back out.
All figures are principal and interest only (no taxes or insurance), start from a new 30-year loan, and assume interest is charged monthly. Lenders that compute interest daily will differ slightly. Every row was generated by the same simulation that matched our mortgage spreadsheet to the cent in six test scenarios. Not financial advice.