QuietCalcsWhy extra payments punch above their weight
Every regular mortgage payment is split between interest (the bank's share) and principal (yours). Early in a loan, most of the payment is interest — on a $300,000 loan at 6.5%, the first payment is about $1,625 of interest and only $271 of principal.
An extra payment skips that split entirely: 100% of it reduces principal. That shrinks the balance that every future month's interest is computed on, which means each following payment automatically has a bigger principal share. The effect compounds in your favor for the remaining life of the loan — which is why a modest extra payment early on can erase years.
A worked example
Take that $300,000 loan at 6.5% with 30 years left. The required payment (principal and interest) is about $1,896 per month, and the normal schedule pays roughly $382,600 in interest — more than the house.
Add $200 extra per month and the loan pays off in about 23 years instead of 30, saving roughly $100,000 of interest. The extra $200 costs you about $55,000 over those years — the rest is interest that simply never accrues.
Tell your servicer where the money goes
One practical trap: an extra payment sent without instructions may be applied to next month's payment (including interest) or sit in escrow, not reduce principal. When you pay extra, mark it "apply to principal" — most servicer websites have an explicit field for it. Check your next statement to confirm the balance dropped by the full extra amount.
The biweekly trick, recasting, and refinancing
Biweekly payments — half your payment every two weeks — produce 26 half-payments a year, which is 13 full payments instead of 12. It's just a disguised extra payment of one month per year, and you can replicate it here by entering your payment ÷ 12 as the monthly extra.
Recasting is the reverse lever: after a lump-sum principal payment, the lender re-computes a lower monthly payment over the same term (usually for a small fee). Choose recasting if you want breathing room in the budget; choose extra payments if you want out of debt sooner.
Refinancing only helps if the new rate is meaningfully lower after closing costs — a different decision from prepaying, and often worth modeling separately.
Should you prepay the mortgage or invest instead?
Prepaying earns you a guaranteed, tax-free return equal to your mortgage rate — at 6.5%, that's a strong risk-free number. Investing in markets has historically returned more on average, but with real risk and sequence luck. The honest answer is that both are good uses of spare cash, the right mix depends on your rate, tax situation, and temperament — and neither beats first having an emergency fund and capturing any employer retirement match. If early retirement is the goal, the Coast FIRE calculator shows what the same monthly amount does when invested.
What this calculator covers
Principal and interest only — the amortizing part of the loan you can actually change. Property taxes, homeowner's insurance, PMI, and HOA fees ride along in many payments but don't amortize, so they're excluded. The math here applies to any standard repayment loan: U.S. and Canadian mortgages, UK repayment mortgages, and most European annuity loans (Canadian readers: your posted rate is compounded semi-annually, so the true monthly rate is a touch lower than rate ÷ 12 — results here will be very close but not to the cent).
Frequently asked questions
Do extra payments lower my monthly payment?
No — they shorten the loan. Your required payment stays the same; it just ends years earlier. If you want a lower payment instead, ask your lender about recasting after a lump-sum payment.
Is there a penalty for paying off a mortgage early?
Rare on modern U.S. conforming loans, but check your note — some loans (and some countries) have prepayment charges, especially in the first years or on fixed-rate deals in Europe.
Is one big payment better than monthly extras?
Money applied sooner saves more interest, so a lump sum today beats the same total spread over years. But consistent monthly extras are easier to sustain — the best plan is the one that actually happens.
Are biweekly payment programs worth it?
The math works (about one extra payment per year), but never pay a servicer a fee for it — you can get the identical effect for free by adding 1/12 of your payment as a monthly extra.
Does this work for currencies other than dollars?
Yes — pick your currency and the formatting follows. Amortization math is identical for any standard repayment loan.
Related calculators
Coast FIRE Calculator — the invest-instead side of the prepay-or-invest question.
Hourly to Salary Calculator — figure out what your time is worth before deciding where it goes.