Extra Mortgage Payment Calculator (2022)

Jump to section: Pros of extra payments | Cons of extra payments | Should you refinance? | Pro tips

Making extra payments can drastically reduce your loan term and save you a tremendous amount on interest charges. Use our extra mortgage payment calculator to see how fast you can pay off your mortgage with additional monthly payments.

Extra mortgage payment calculator

💰 Initial loan amount: how much you originally borrowed to purchase your home. When you make extra mortgage payments, you’re reducing this initial loan.

🕒 Term of the loan: the amount of time you’ve agreed to pay off your mortgage. For example, a 30-year mortgage would have a loan term of 30 years.

🗓 Years remaining: the time that’s left on your mortgage. For example, if you’ve been paying a 30-year mortgage for 5 years, then you have 25 years left.

💸 Extra payments: what you pay in addition to your regular monthly mortgage payments. When you put extra money toward your initial loan balance (the principal), you can pay your loan faster and save on interest.

📈 Interest rate: what you pay to borrow money to purchase your home, calculated as a percentage of your loan balance. As you pay down your initial loan, your interest charges gradually decrease.

For instance, if you have an interest rate of 5% on a home loan of $300,000, you would pay $15,000 in interest charges for the first year (or $1,250 per month).

Is it worth making extra mortgage payments?

When you SHOULD make extra mortgage payments

✅ You’re in a solid financial position

You have an emergency fund, you’re saving for retirement, you and your family are properly insured, you don’t have high-interest debts, and your income is stable. Only when your finances are rock-solid does it make sense to add an extra mortgage payment.

✅ You want to reduce your expenses

Paying your mortgage early frees up your income and allows you to focus on other goals. For example, if you’re planning on retiring soon, cutting out your monthly mortgage payment will drastically reduce your retirement expenses, helping you live longer on your savings.

When you SHOULD NOT make extra mortgage payments

❌ You have high interest debt

Credit cards and personal loans typically have higher interest rates than mortgages. Focus on paying off high-interest debts first before you make extra monthly mortgage payments.

❌ You’re moving soon

Home purchases require a lot of liquid cash (i.e., money that’s not tied up in your home equity). You’ll need cash for your down payment, closing costs, and moving fees.

❌ You’re not saving for retirement

Generally speaking, the money you save on interest rarely outweighs the money you can earn through investments. Instead of putting extra money toward your mortgage, it might be wiser to contribute more in your retirement accounts.

Should you refinance instead?

Refinancing could be a better option than making extra payments if:

• You can get a lower interest rate
• You want lower monthly payments
• You want a new mortgage with more favorable terms

» JUMP: How to decide which option is best for you

Tips for making extra mortgage payments

Make a principal-only payment

A principal-only payment is applied to the amount you initially borrowed (the “principal”) — not to the interest. Making an extra payment toward principal directly reduces how much you owe on the loan, helping you pay off the initial balance faster.

Check for any prepayment penalties

Some lenders charge a prepayment penalty if you pay part or all of your mortgage early. These penalties often kick in when you pay a significant amount (usually more than 20% of your loan balance) at once. Check your mortgage papers or with your lender to see if you’ll be charged any fees for making extra mortgage payments.

Consider a lump sum

Making a one-time lump sum payment could lower your monthly mortgage payments and save you on interest over the long run.

A lump sum payment could make sense if your lender lets you recast the mortgage afterward — meaning, your lender would apply the lump sum to your principal and create a new payment schedule based on the reduced loan balance.

But lump sum payments don’t always make sense. If your lender charges a prepayment penalty, you’d be better off making extra payments in small amounts. You might also need that lump sum as an emergency fund, or to pay down high-interest debt.

Refinancing vs. making extra mortgage payments

Refinancing could shorten your mortgage, save you money on interest, and help you cash in on home equity.

When you refinance your mortgage, you substitute your current mortgage with a new one. Your new mortgage will typically have new terms, such as a different interest rate, term length, loan amount, and even loan type.

When refinancing makes sense

You can get a lower interest rate. Lenders will use prevailing interest rates to refinance your mortgage. When current rates are lower than the rate on your mortgage, refinancing might help you save on interest over the long run.

You want lower monthly payments. If you’ve already paid a significant amount toward your principal, refinancing could lower your monthly mortgage payments.

You want a new mortgage with more favorable terms. Refinancing gives you the opportunity to change your mortgage. For instance, if you have an adjustable-rate mortgage, refinancing could help you get a fixed-rate loan.

When making extra payments makes sense

Current interest rates are high. If you already have a low rate, refinancing would lock you into a higher rate, and you’d likely pay more interest in the long run.

You want to pay off your mortgage sooner. When you refinance, you might extend your loan term. For example, if you refinance into another 30-year mortgage, you would stretch out your payments another 30 years. This could reduce your monthly mortgage payments, but it might cost you more in interest.

The up-front costs of refinancing outweigh the savings. Refinancing fees will cost you around 2–3% of your remaining loan balance. Use our extra mortgage calculator above to see if you’d save more money by making extra payments rather than refinancing.