Making Extra Mortgage Payments: How Much Can You Save?
Mike Starr
Founder, MortgageWizardTools · M.S. Organizational Management
Extra mortgage payments are one of the most effective ways to save on interest and shorten your loan term. Because interest is calculated on the remaining balance, every extra dollar reduces all future interest charges. Even modest extra payments can have a dramatic impact.
How Extra Payments Work
When you make an extra payment, the entire amount goes toward reducing your principal balance (assuming your lender applies it correctly — verify this). A lower balance means less interest accrues each month, which means more of your regular payment goes to principal, accelerating the payoff.
Example: $200 Extra Per Month
On a $400,000, 30-year, 6.5% loan:
| Regular | $200 Extra/Month | |
|---|---|---|
| Monthly Payment | $2,528 | $2,728 |
| Payoff Time | 30 years | 23.5 years |
| Total Interest | $510,000 | $356,000 |
| Interest Saved | — | $154,000 |
| Years Saved | — | 6.5 years |
$200/month extra saves $154,000 in interest and pays off the loan 6.5 years early.
Example: $500 Extra Per Month
| Regular | $500 Extra/Month | |
|---|---|---|
| Monthly Payment | $2,528 | $3,028 |
| Payoff Time | 30 years | 18 years |
| Total Interest | $510,000 | $243,000 |
| Interest Saved | — | $267,000 |
| Years Saved | — | 12 years |
Strategies for Extra Payments
- •Round up — pay $2,600 instead of $2,528 (saves $72/month extra)
- •Biweekly payments — 26 half-payments = 13 full payments per year
- •One extra payment per year — use tax refund or bonus
- •Round to the next $100 — $2,600 instead of $2,528
- •Increasing payments — add $50/month each year as income grows
Important Considerations
- •Verify the application — make sure your servicer applies extra payments to principal, not future payments
- •Check for prepayment penalties — rare on modern loans, but verify
- •Keep an emergency fund — do not put every spare dollar into the mortgage
- •Consider investment alternatives — if your rate is low, investing may yield more
- •Tax impact — paying off faster reduces mortgage interest deduction
Key Takeaways
- •Extra payments reduce principal, which reduces all future interest
- •$200/month extra can save $150,000+ in interest on a typical loan
- •Even rounding up your payment makes a meaningful difference
- •Verify your servicer applies extras to principal
- •Use our Extra Payment Calculator to see your savings