How to use this calculator
Pull three numbers from your latest mortgage statement: the current balance, the interest rate, and how long is left. Then describe the acceleration you're considering:
- An extra monthly payment is a recurring amount on top of the required payment, applied straight to principal.
- A one-time lump sum is a bonus or windfall, with a field for when you'd pay it (savings are larger the sooner it lands).
- You can combine both; the schedule recomputes with each keystroke.
The headline is the modeled interest saving, and the chart compares the two balance paths. Before sending extra money, check the note for any prepayment charge and confirm that the servicer will apply the amount to principal rather than a future payment.
The mathematics of a mid-life mortgage
In this fixed-rate model, principal removed today no longer accrues interest in later months. On the default inputs, a $240,000 balance at 6% with 22 years left, the required payment is $1,639.38 and the remaining schedule contains $192,796 of interest. Adding $200/month reduces that to $149,701: a modeled saving of $43,095, with the loan finishing 4 years 4 months earlier.
Time remaining changes the result substantially. The same $240,000 balance and 6% rate with only 8 years left saves $4,985 from the same $200 monthly extra, because fewer interest-bearing months remain. This does not make a late prepayment wrong; it shows why the interest-saving effect is smaller.
Compare that saving with the alternatives available to you. Taxes, deductions, investment risk, emergency cash needs and the cost of borrowing the money back can all change the decision. The calculator only measures the mortgage schedule; it does not determine the best use of the cash.
Three tools exist for killing a mortgage faster: prepay (what this calculator models: flexible, stop any time), recast (a lump sum plus a servicer re-amortization that lowers the required payment), and refinance (a new loan entirely; see the refinance calculator when the issue is your rate rather than your balance).
Formula and methodology
Both plans run the same declining-balance schedule; only the payment differs:
Bkbalance after month k (B₀ = current balance)rmonthly rate = annual rate ÷ 12Mrequired payment for the remaining termEkyour extra that month (recurring, lump sum, or both)
Interest saved = (interest under the current plan) − (interest under the accelerated plan), where each plan's interest is the sum of Bk−1 × r over its own schedule. Months saved is the difference in schedule lengths. The lump sum enters at the month you choose; the final payment of each plan is trimmed so the balance ends at exactly zero.
Worked example
Required payment on the remaining term: $1,639.38. Staying the course, the remaining 264 payments carry $192,796 of interest.
Paying $1,839.38 instead clears the loan in 212 months (17 yr 8 mo), 52 months early, with total interest of $149,701. Interest saved: $43,095.
Alternative: a single $10,000 lump sum next month (no recurring extra) saves $25,257 and 21 months. The lump sum wins per dollar committed because all of it starts working immediately.
What changes the result
- Years remaining. The dominant factor: $200/month saves $43,095 with 22 years left, but only $4,985 with 8 years left on the same balance and rate. In the model, earlier prepayments avoid the most interest because the balance, and therefore each month's interest charge, is largest at the start.
- Rate. A higher note rate increases the modeled interest avoided by reducing principal. Compare that result with the after-tax return, risk and liquidity of other uses for the money.
- Lump timing. Moving a lump sum earlier adds interest-bearing months. The month field lets you compare paying now versus after your next bonus.
- Liquidity. Prepaid principal is hard to access again without borrowing or selling, so cash-reserve needs such as an emergency fund are part of the trade-off the calculator doesn't measure.
Assumptions and limitations
- Assumes extras are applied to principal immediately and the required payment stays fixed. A servicer recast, which lowers the required payment after a lump sum, is a different transaction.
- No prepayment charge is modeled. Check the note and current servicer instructions before making an extra payment.
- The tax deduction for mortgage interest (where itemized) slightly reduces the effective saving from prepaying; this is not modeled.
- Interest saved is not discounted to present value: a dollar of interest avoided in 2044 is treated the same as one avoided next year.
- If the rate is your real problem, compare against the refinance calculator; prepaying an expensive loan is sometimes second-best.
Frequently asked questions
Is paying extra on the mortgage better than investing the money?
This calculator measures interest avoided under the mortgage's current rate and payment rules. Investing has an uncertain return, while prepaying reduces liquidity and may interact with taxes or deductions. Compare both on an after-tax basis and keep cash needs in view; the mortgage result alone cannot choose between them.
Should I prepay, recast, or refinance?
Prepay when you want flexibility and your rate is acceptable. Recast when you have a lump sum and want a lower required payment without new-loan costs; the term stays put, but cash flow eases. Refinance when today's rates are meaningfully below yours; the fee/break-even math lives in the refinance calculator. Many owners combine them: refinance the rate, then prepay the new loan.
Why does the same extra payment save so little on an older loan?
Because savings come from removing future interest-bearing months, and an older loan has few left. With 22 years remaining, a prepaid dollar avoids interest for up to 264 months; with 8 years left, at most 96. That's why the identical $200/month saves $43,095 in the first case and $4,985 in the second.
Does one extra payment a year really shorten a mortgage by years?
On a loan with many years remaining, yes. An annual extra equal to one payment is roughly a $137/month equivalent on the default loan, and recurring extras of that size cut multiple years from a long schedule. Enter your own figure in the extra-monthly field (annual amount ÷ 12) to see the exact months saved rather than relying on the rule of thumb.
Will my servicer automatically apply extras to principal?
Not always. Some servicers apply surplus to next month's payment or to escrow unless told otherwise, which earns you nothing. Mark extra amounts explicitly as "principal only" (many servicer portals offer the option), and check the next statement to confirm the balance dropped by the full extra amount.