Principal Curtailment Savings Calculator
Calculate the interest savings from making principal curtailment payments — lump sum or recurring extra payments toward principal. Each $1 of principal paid early saves ~ $0.50-$0.80 of interest over the loan life (rate-dependent). Compares one-time, monthly, and annual extra-payment strategies.
Why Principal Curtailment Works
Each early principal dollar reduces every future interest calculation. On a 30-year, $300K loan at 6.5%, an early $10K curtailment at month 12 saves ~$11,800 in interest over the loan life and shortens the term by ~25 months. The earlier you pay, the bigger the saving — because more remaining payments are still subject to that compounding. Curtailments in years 25-30 save very little because most of the interest has already been paid.
Three Strategies Compared
One-time lump sum: simplest. Pays down balance immediately, saves most when made early. Use tax refunds, bonus, inheritance. Recurring monthly extra: $100-$500 per month adds up. A $200/month extra on a $300K 30-year at 6.5% shortens the loan by ~6 years and saves ~$80K. Annual lump (e.g. tax refund): similar to monthly extra but easier to budget. Generally the math favors monthly extras (more frequent compounding) marginally, but psychologically annual lump is easier.
Biweekly Payments — Disguised Curtailment
'Biweekly payment plans' marketed by banks are NOT magic — they just add one extra monthly payment per year (26 biweekly = 13 monthly equivalent). Same effect as paying 1/12 extra monthly. Free DIY: divide monthly P&I by 12 and add as monthly extra principal. Don't pay for biweekly enrollment services — most charge $250-$500 setup + $5-$10/month for what you can do yourself. Make sure lender applies extra to principal (specify in memo/note).
When Not to Curtail
(1) You haven't built 6-month emergency fund yet — liquidity matters more than rate arbitrage. (2) High-interest debt exists (credit card 22% > mortgage 6.5%) — pay that first. (3) 401(k) match not maxed — guaranteed 100% return beats mortgage rate. (4) Tax-loss harvesting available — better tax-adjusted return. (5) Mortgage rate < expected investment return — math favors investing. (6) PMI on mortgage — special case: hit 80% LTV first, eliminate PMI (often 0.5-1.5% annual cost), then evaluate further curtailment.
Sources: Consumer Financial Protection Bureau, FRB Mortgage Math primers, IRS Publication 936 (home mortgage interest). Last updated: May 2026.