Mortgage Prepayment Savings Calculator
Calculate how an extra principal payment each month shortens your mortgage and saves interest over the life of the loan.
Why Extra Principal Payments Work So Well
Every extra dollar of principal paid eliminates the interest that dollar would have generated for the rest of the loan term. On a 30-year mortgage at 6.85%, an extra $200/month from day one shaves about 7 years off the loan and saves over $130,000 in interest. The math is identical to earning a guaranteed return equal to your mortgage rate — risk-free, tax-free (you can't be taxed on interest you didn't pay).
The earlier you start the extra payments, the bigger the impact. The first $1,000 extra paid in year 1 of a 30-year loan saves more interest than the $1,000 extra paid in year 20. Source: Freddie Mac amortization research. Last updated: May 2026.
Extra Principal vs Investing the Difference
The argument against prepayment: invest the extra $200/month instead. At a 10% historical S&P 500 return, $200/month for 30 years grows to about $452,000 — better than the $130,000 saved on the mortgage. The argument for prepayment: the mortgage savings is guaranteed; the 10% return is not. Markets can crash, you might panic-sell, or you might never actually invest the difference.
The hybrid approach: max out tax-advantaged accounts first (401(k) match, Roth IRA, HSA), then split additional savings between extra principal and taxable investing. This captures most of the investing upside while reducing mortgage stress.
Lump-Sum vs Monthly Extra Payments
Both strategies work. A $5,000 lump sum in year 5 of a 30-year mortgage saves about the same total interest as $42/month extra for the same period. The lump sum is psychologically cleaner; monthly extra payments are easier to budget. Some borrowers do both — automate $200/month extra and apply tax refunds or bonuses as lump sums.
Recasting vs Prepayment vs Refinance
Three different tools. Prepayment shortens the term and cuts interest but doesn't change your required monthly payment. Recasting (after a lump sum, typically $5,000-$10,000 minimum) re-amortizes the loan at the new lower balance, reducing your required monthly payment — useful if you want lower obligations. Refinancing requires closing costs and only makes sense if rates have dropped 0.75%+ from your original rate. Source: Consumer Financial Protection Bureau.
Frequently Asked Questions
How much interest can I save with an extra $100/month mortgage payment?
On a $300,000 30-year loan at 7%, an extra $100/month saves roughly $84,000 in interest and pays off the loan 5 years early. The exact savings depend on the loan size, rate, and when the extra payments start. Use this calculator with your specific numbers.
Should I pay extra mortgage principal or invest the money?
Mathematically, if you can earn more than your mortgage rate on an after-tax basis, invest the money. With mortgage rates near 6.85% in 2026 and historical S&P 500 returns near 10%, investing wins on expected value \u2014 but mortgage prepayment wins on certainty and emotional comfort. Best approach: do both proportionally.
Will my lender accept extra principal payments?
Yes, all US conforming mortgages allow extra principal payments without penalty. Specify 'apply to principal' in the memo or check the box on your online payment portal \u2014 otherwise some lenders apply the extra to the next month's payment instead of reducing principal.
Is biweekly mortgage payment the same as extra principal?
Biweekly payments (26 half-payments per year = 13 full payments instead of 12) effectively add one extra monthly payment per year to principal. It works, but you can achieve the exact same result by paying 1/12 of your monthly payment extra each month \u2014 without needing a biweekly setup or third-party servicer.
Are extra mortgage principal payments tax-deductible?
No. Only the interest portion of mortgage payments is potentially deductible (and only if you itemize \u2014 most don't, given the high standard deduction). Principal payments reduce your loan balance but provide no direct tax benefit. Source: IRS Publication 936.
What's better: prepaying mortgage or building emergency fund?
Emergency fund first, always. Aim for 3-6 months of expenses in a high-yield savings account before adding extra to your mortgage. If you prepay aggressively and then face a job loss, you can't easily withdraw that money \u2014 your home equity is illiquid. The order is: emergency fund \u2192 high-interest debt \u2192 retirement match \u2192 mortgage prepayment.