See how much interest you save and how many years you shave off by making extra payments.
If you have a mortgage in this economy, you already know the math is brutal. The interest alone on a 30-year loan at today's rates can easily double the actual cost of your home by the time you're done. What most people don't realize is that even small extra payments, made consistently, can cut years off that timeline and save a shocking amount of money. This calculator shows you what those numbers look like for your specific loan. Plug in what you've got and see what a difference a couple hundred dollars a month actually makes.
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More than most people expect. On a $350,000 loan at 6.5%, paying just $200 extra a month saves around $75,000 in interest and cuts nearly 7 years off your term. That's not a rounding error, that's a car, a college fund, or an early retirement. Run your own numbers above and brace yourself.
Frustratingly, yes and it's a trap. Applying extra payments to future installments doesn't reduce your principal, so you keep accruing the same interest. Every time you pay extra, write "apply to principal only" in the memo or select that option online. Call and confirm if you're not sure. It matters a lot.
Here's the honest answer: if your rate is above 6.5%, paying down the mortgage is often the better guaranteed return, especially after taxes. Below that, a low-cost index fund has historically outperformed over 20+ year horizons. But "historically" is doing a lot of work in that sentence. A paid-off home is risk-free. Markets aren't. Your answer depends on your stomach for risk as much as the math.
A one-time lump sum early in your loan is one of the highest-leverage financial moves you can make. Because interest is calculated on your remaining balance, paying down $5,000 in year 2 saves far more than $5,000 in year 20. The sooner you do it, the harder it works.
On most loans originated after 2014, no. The Dodd-Frank Act heavily restricted them. But check your original loan documents anyway, especially if you have an older loan or a non-QM (non-qualified mortgage). Search for the word "prepayment" in your closing disclosure. If you can't find it, call your servicer directly.
It's a standard amortization formula: M = P × [r(1+r)^n] / [(1+r)^n – 1]. P is your loan balance, r is your monthly interest rate (annual ÷ 12), and n is the number of payments. What this means in plain English: your early payments are mostly interest, and that shifts toward principal over time. It's not a conspiracy. It's just how compound interest works against you at the start.