Extra Payment Calculator

Enter the balance you still owe, the rate, the remaining term and the amount you plan to pay early. The calculator compares the two ways a lender can apply it: keep the payment and shorten the term, or recast the loan so the term stays and the payment falls.

How to use the extra payment calculator

1. Outstanding loan balance: the principal you owe today, from your latest statement or online account. Do not use the original loan amount.
2. Interest rate: the current rate on the loan.
3. Remaining term: the years left until the loan would be paid off on schedule.
4. Extra payment: the lump sum you plan to put toward principal, such as a bonus, a tax refund or part of your savings.

The result shows the interest you would save each way, how much earlier the loan would end if you keep the payment the same, and what the new payment would be if you recast. The table puts three cases side by side: no extra payment, shorter term and lower payment.

A worked example

Say you owe $300,000 at 6.5% with 15 years left. Your payment is about $2,613 a month, and if you change nothing you will pay about $170,398 more in interest.

Now you put $50,000 toward principal.

	No extra payment	Shorten the term	Lower the payment
Monthly payment	$2,613	$2,613	$2,178
Time left	15 years	11 years 4 months	15 years
Interest still to pay	$170,398	$103,237	$141,998
Interest saved		$67,161	$28,400

Keeping the payment the same saves about $67,000 and ends the loan 44 months early. Recasting saves about $28,000 and frees up $435 a month.

A smaller amount works the same way. A one-time $10,000 extra payment on the same loan saves about $15,800 of interest and takes 9 months off if you keep the payment, or about $5,700 if you recast to a payment of $2,526.

Shorten the term or lower the payment?

The shorter term saves more because your payment stays at the higher level, and every dollar above the interest for the month pays down principal. With a recast, the lender spreads the smaller balance across the same number of months, so you pay less principal each month and interest keeps running on it longer.

Lowering the payment still makes sense when:

• your budget is tight and the lower required payment gives you breathing room,
• you want flexibility, because you can keep paying the old amount voluntarily and get most of the shorter-term saving while being allowed to drop back if money gets tight,
• you are about to take on another cost, such as childcare or a car loan, and want a lower fixed outflow.

That middle option is worth noting. If you recast and then keep paying $2,613 anyway, the loan ends at the same time as in the first column, and you have a lower minimum to fall back on. You give up nothing except the recast fee.

How lenders apply extra payments

US mortgage servicers handle extra money in one of three ways, and it pays to check which one yours uses:

• Principal-only payment. The money reduces the balance right away and the regular payment and schedule stay the same. This gives the “shorten the term” result. Most servicers have a separate field or checkbox for it online.
• Paid ahead. Some servicers treat extra money as an early payment of future installments, which does not reduce the balance any faster. Say in writing that the extra is to be applied to principal.
• Recast. You ask the lender to recalculate the payment on the new balance. Many servicers require a minimum lump sum, often $5,000 or $10,000, and charge a fee, commonly $150 to $500. FHA and VA loans generally cannot be recast.

Refinancing also lowers the payment, but it means a new loan with closing costs. If the rate on your current loan is good, a recast is the cheaper route. The refinance calculator shows whether a new rate would be worth the costs.

Prepayment penalties

Most US mortgages have no prepayment penalty. Federal rules limit penalties on qualified mortgages to the first three years and cap them at 2% of the prepaid balance in years one and two and 1% in year three. Many lenders do not charge one at all. Some auto loans, personal loans and business loans do charge a fee, or use the Rule of 78s method, which front-loads interest so that early payoff saves less than you might expect. Read the prepayment section of your loan agreement before you send a large sum.

Is paying early the best use of the money?

Paying down a loan gives you a guaranteed return equal to its interest rate. On a 6.5% mortgage, each extra dollar earns 6.5% a year with no risk. Whether that beats other uses depends on your situation:

• Build an emergency fund first. Money in the house is hard to get back out without a loan or a sale.
• Take any employer 401(k) match, which is usually worth more than the mortgage rate.
• Pay off higher-rate debt first, such as credit cards or private student loans.
• Compare with what you could earn elsewhere. If your mortgage rate is 3%, a CD or Treasury bill may pay more. Use the CD calculator to compare.
• Think about taxes. If you itemize, mortgage interest is deductible, which lowers the effective rate a little. Most households now take the standard deduction, so for them it makes no difference.

Auto loans, student loans and personal loans

The same math applies to any amortizing loan, but the details differ. Auto lenders usually apply extra money to principal if you ask, and many charge interest daily, so paying early in the billing cycle helps a little. Federal student loan servicers apply extra money to accrued interest first and then to principal, and by default they may advance your due date; you can ask them to apply it to principal without advancing the due date. With several loans, put extra money on the one with the highest rate first. On a short loan the saving is smaller in dollars, because there is less time for interest to run, but the guaranteed return is still the loan’s rate.

Regular extra payments

The calculator models a single lump sum. Regular extra payments, such as $200 more every month, save even more because the money goes in from the start. One easy approach is to take the extra amount, multiply it by the number of months until you would next review it, and run that as a lump sum. That overstates the saving slightly, since the money arrives gradually. For a precise month-by-month view, download the CSV from the amortization schedule and add an extra-payment column.

Whichever method you use, check the next statement to confirm the extra money reduced the principal balance. Servicers do make mistakes, and they are much easier to fix in the same month.

All calculations run in your browser. Nothing is sent to us or stored.

Learn more

Most US mortgages have no prepayment penalty; some auto and personal loans do, so check the loan agreement. Extra mortgage payment: shorten the term or lower the payment? goes through the choice with real numbers. When to pay off your mortgage early covers timing and the investment alternative.

Frequently asked questions

How much does one extra mortgage payment a year save?

On a $300,000 loan at 6.5% with 15 years left, one extra payment of $2,613 at the end of every year saves about $21,500 in interest and ends the loan 21 months early. The earlier in the loan you start, the bigger the effect. Paying half the payment every two weeks produces the same 13 payments a year automatically.

Is it better to pay extra early or late in the loan?

Early. An extra dollar of principal saves the interest it would have collected for every remaining month. Paid in year 2 of a 15-year loan, it avoids 13 years of interest. Paid in year 14, it avoids one year. Late in a loan most of each payment already goes to principal, so extra payments change little.

Will my monthly payment go down if I pay extra?

Not automatically. Most servicers keep the payment the same and the loan simply ends sooner. To lower the payment, you need to ask for a recast, which usually requires a minimum lump sum and a fee. Check your servicer’s policy before you send the money if a lower payment is what you want.

Can I pay extra on an FHA or VA loan?

Yes. FHA and VA loans allow extra principal payments at any time without a penalty, and the loan will be paid off sooner. What they generally do not allow is a recast, so you cannot lower the required payment after a lump sum. To reduce the payment on those loans, you would need to refinance.

Does paying extra lower my escrow payment?

No. Escrow covers property tax and homeowners insurance, which depend on the home’s assessed value and your policy, not on the loan balance. Paying down principal can help you reach 80% loan-to-value sooner on a conventional loan, and removing PMI at that point will lower your total payment.

Should I pay off my mortgage or invest?

Paying down the mortgage earns its interest rate with no risk. Investing may earn more over long periods but can lose money in any given year. Many people do both: take the full employer retirement match, keep an emergency fund, then split extra money. The higher your mortgage rate, the stronger the case for paying it down.