Why extra principal works so well
Interest on a mortgage is charged each month on whatever balance remains. So every dollar you pay above the required amount goes straight to principal, permanently shrinking the balance that all future interest is calculated on. The benefit compounds: a smaller balance this month means less interest next month, which leaves more of the regular payment to attack principal, and so on.
This calculator first works out your required payment from the current balance, rate and remaining term. It then simulates the loan month by month with your extra payment added, and compares the result against the original schedule to show how much sooner you finish and how much interest you avoid.
Reading the comparison
The chart sets the interest you would pay with no extra against the interest you pay once the extra is applied. The gap between the two bars is the interest saved — money that would otherwise have gone to the lender.
The headline figures translate that into time as well: months shaved off the loan and dollars of interest saved. Even a modest extra payment often removes years from a long mortgage, because the early balance is so large that small reductions compound for a long time.
Getting the most from extra payments
A few practical points help the strategy pay off:
- Confirm with your servicer that extra amounts are applied to principal, not held as a prepayment of the next bill.
- Earlier extra payments save far more than the same amount paid late in the term.
- Check for any prepayment penalty before committing.
- Weigh the guaranteed interest savings against other uses of the cash, such as higher-yielding investments or paying off costlier debt.
Assumptions
The model assumes a constant rate and that every extra dollar reduces principal immediately. It does not account for taxes, insurance, or escrow changes. Use it to gauge the impact of accelerating payoff, not as a substitute for your servicer’s statements. This is general information, not financial advice.
Formula
base payment from balance, rate, remaining term; each month: interest = balance·r, principal = payment + extra − interestFrequently asked questions
- Does extra payment go straight to principal?
- Yes. This model assumes every extra dollar reduces the principal, which is how additional principal payments work on most mortgages.