Extra Payment Calculator

How Extra Payments Save You Money

Every dollar you pay above your required monthly payment goes directly toward reducing your principal balance — not toward interest. Because mortgage interest is calculated on the remaining balance each month, a lower balance means less interest accrues in every subsequent month. This creates a compounding savings effect that grows larger the earlier you start making extra payments.

How the Calculator Works

This calculator runs a month-by-month amortization simulation. It first calculates your standard payment using the classic formula, then runs a second simulation that applies your extra monthly payment, extra annual payment, and any one-time lump sum at the month you specify. In both cases, your base P&I payment stays the same — the extra amounts go straight to principal, which reduces the remaining balance and shortens the number of months needed to reach zero.

Extra Monthly Payment

Adding a fixed amount to every monthly payment is the most consistent approach. Even $100 to $200 per month on a 30-year mortgage can eliminate 4 to 6 years of payments and save tens of thousands in interest. The savings come from reducing your outstanding balance faster each month, so less interest accrues over the life of the loan.

Extra Annual Payment

Making one extra payment per year — often using a tax refund, bonus, or year-end savings — is another powerful strategy. This is mathematically equivalent to making one additional monthly payment every 12 months. Some borrowers achieve this by splitting their monthly payment into biweekly payments (26 half-payments = 13 full payments per year), which is a built-in annual extra payment strategy.

Lump Sum Payment

A one-time lump sum payment, such as an inheritance, investment gain, or cash gift, can dramatically reduce your balance in a single transaction. The earlier in your loan term you apply it, the more interest you avoid — because that principal would have otherwise been accruing interest for all remaining months. Always confirm with your lender that the payment will be applied to principal, not to future scheduled payments.

Combining All Three Strategies

You can combine all three extra payment types for maximum impact. A modest monthly addition, an annual lump sum from a tax refund, and a one-time principal payment from a windfall can together shave a decade or more off a 30-year mortgage, potentially saving hundreds of thousands of dollars in total interest paid.