∑ Calculivo

Mortgage Payoff Calculator

See how much you save by paying extra principal — months sliced off your mortgage and tens of thousands in interest saved.

Extra payments (optional) +

Result —

About this calculator

Paying extra principal on your mortgage is one of the highest guaranteed returns you can earn — every dollar reduces future interest at your mortgage rate, tax-free. This calculator shows the precise impact: how many months come off your term and how much interest disappears when you add an annual extra payment.

How it works

Enter your loan amount, interest rate and original term. The Monthly payment line is the standard contractual payment your lender quotes. Then in the Extra payments section, add an annual extra principal payment — anything from a small tax refund to a bonus check.

Under the hood the calculator walks the schedule month by month. Each regular payment splits into interest (calculated on the current balance) and principal. At month 12, 24, 36 and so on, your extra annual payment is applied directly to principal — reducing the balance and therefore the interest charged for every subsequent month.

The math is brutal in the borrower's favour: on a 30-year mortgage at 6%, adding even $500 a month in extra principal typically pays the loan off 8–10 years early and saves $80,000+ in interest. That's because you skip ALL the interest those last years would have charged on the remaining balance.

Compare the return to investing the same money. At a 6% mortgage rate, every extra dollar you pay is a 6% guaranteed, risk-free, tax-free return on the interest you would have paid. Few investments beat that on a risk-adjusted basis. The exception: if your mortgage rate is well below your expected long-term investment return (3% mortgage vs 7% stock market real return), investing usually wins.

Formula

Standard payment = P · ( i · (1 + i)^n ) / ( (1 + i)^n − 1 )

Month-by-month simulation with extras:
  interest[m]     = balance[m-1] · i
  principal[m]    = standard_payment − interest[m]
  balance[m]      = balance[m-1] − principal[m] − extra_this_month

Loop stops when balance ≤ 0. Months saved = nominal_months − actual_months.

Examples

$300,000 at 6% for 30 years, $6,000 extra per year

Adding $6,000 per year ($500/mo equivalent) shaves about 7 years off the 30-year term and saves around $114,000 in interest. The standard monthly payment is unchanged — you're just front-loading principal.

Result: Standard payment ≈ $1,798.65 — Months saved ≈ 86 — Interest saved ≈ $114,000

Same mortgage with $12,000 annual extra

Doubling the extra doesn't double the savings (the curve flattens) but the loan is paid off in roughly half the original term and total interest drops by about $179,000.

Result: Months saved ≈ 142 — Interest saved ≈ $179,000

Frequently asked questions

Is there a prepayment penalty on US mortgages? +
Most modern US conforming loans have no prepayment penalty after the first 1–3 years (and many never had one). Check your loan documents — older loans, some private loans and some commercial mortgages can have penalties.
Should I pay extra each month or in one annual chunk? +
Monthly extras save slightly more interest because the principal drops 12 times a year rather than once. But annually is much easier to budget and the difference is small — maybe 1–3% more interest saved monthly vs annually.
What if my lender doesn't apply extras to principal? +
Specify in writing that any extra payment is to be applied to principal, not to the next scheduled payment. Some lenders default to advancing your next due date instead of reducing principal — which saves you nothing in interest.
Payoff vs. invest — which wins? +
If your mortgage rate is above your expected risk-adjusted investment return (e.g. 6% mortgage vs ~5% Treasury yield), paying off mortgage is the better risk-free return. If well below (3% mortgage vs ~7% real stock return), investing usually wins long-term.
Does this affect my tax deduction? +
If you itemize mortgage interest, paying down faster reduces the interest you can deduct. But for most borrowers post-TCJA (2018+), the standard deduction is higher than itemized so this doesn't matter. Consult a tax pro for your situation.

Related calculators