Mortgage Payoff Calculator

Extra principal cuts interest for the rest of the life of the loan, so even a modest amount adds up. On a $300,000 loan at 6.5%, an extra $200 a month can take roughly 5 to 7 years off the schedule and save somewhere between $80,000 and $100,000 in total interest. The earlier in the loan you start, the bigger the effect, since early payments are mostly interest. Use the calculator above to see your own numbers.

Both work, but they save differently. A monthly extra payment is automatic and builds on itself month after month. A one-time lump sum applied early in the loan has an outsized effect because it stops interest on that principal for decades. Do whichever you'll actually stick with. If you get an annual bonus or a tax refund, a lump sum puts that money to work. If you have steady income with a little slack, monthly extras are easy to keep up. Combining both saves the most.

It depends on your mortgage rate versus realistic after-tax investment returns, plus your comfort with risk. Historically the S&P 500 has returned about 7% to 10% a year, so if your rate is 3% to 4%, investing has usually come out ahead on paper. With rates around 6% to 7%, paying down the mortgage is closer to a guaranteed return that's hard to beat. Don't ignore the personal side either: owning your home outright is a real kind of security. Many people split the difference, contributing to retirement accounts while also paying extra on the loan.

Most conventional, FHA, VA and USDA loans originated today have no prepayment penalty, so you can pay extra or pay off the balance whenever you want. Some older loans, certain non-QM products and some investor loans do include prepayment penalties, usually for the first 1 to 5 years. Check your closing documents or ask your servicer. When you make an extra payment, mark it 'apply to principal'; otherwise some servicers credit it toward next month's payment instead of reducing principal.

Refinancing lowers the rate on your entire balance right away, which can help if rates have dropped meaningfully since you closed. Paying extra doesn't change your rate but removes the principal that interest is charged on. The two pair well: refinance to a lower rate when it makes sense, then keep paying close to your old payment so the difference goes to principal. If rates haven't moved much, paying extra usually wins, since refinancing comes with closing costs that take time to recover. Our refinance break-even calculator shows how long.