Guide · Extra payments
How extra mortgage payments actually work.
Every month, your mortgage payment is split in two. Interest gets paid first — your remaining balance times your annual rate, divided by twelve. Whatever's left of the payment goes to principal. Early in a loan the balance is huge, so interest devours most of the payment; on a $400,000 loan at 6.5%, the first month's payment of about $2,528 sends roughly $2,167 to interest and only $361 to principal.
An extra payment skips that split entirely. Every extra dollar goes straight to principal — and here's the part that makes it powerful: next month's interest is calculated on the new, smaller balance. So one extra payment doesn't save interest once; it saves a little interest every single remaining month of the loan. The savings compound in your favor, the same machinery that normally works for the lender.
Why timing beats amount
Because the savings accrue every remaining month, an extra dollar paid in year one has decades to work; the same dollar in year twenty-five has only a few years. This is why a $10,000 lump sum in the first year of a 30-year loan typically saves far more total interest than $10,000 spread across years ten through twenty — earlier money simply works longer.
You can see this directly: on the calculator, type a lump sum into a single early month's extra column and note the interest saved. Then clear it, put the same total in a late year, and compare. The scenario table on that page does the same comparison for recurring monthly amounts.
What extra payments do — and don't do
They shorten the loan and cut total interest. They do not lower your required monthly payment; that stays fixed until the loan simply ends early. If a lower payment is the goal, the tools are different: a refinance (new loan, new rate, closing costs) or a recast (lump sum plus a small fee, and the lender re-spreads your balance over the remaining term).
The honest case against prepaying
Paying down a 6.5% mortgage is, mathematically, a guaranteed 6.5% return. That's excellent as guaranteed returns go — but it's not automatically your best move. Three things routinely beat it:
High-interest debt. A credit card at 24% costs you nearly four times what your mortgage does per dollar owed. Extra money goes there first, every time.
An emergency fund. Money sent to your mortgage is locked in the walls — you can't easily get it back without borrowing or selling. If prepaying would leave you unable to cover a few months of expenses, the flexibility of cash is worth more than the interest saved.
Matched retirement contributions. An employer match is an instant, guaranteed 50–100% return. Nothing about a mortgage competes with that.
And if your rate is very low — the sub-4% loans many people locked in — the math genuinely flips: reasonably safe investments may earn more than your loan costs, making prepayment a comfort choice rather than a financial one. Comfort choices are allowed. Just make them knowingly.
A practical way to start
Pick an amount you won't miss, set it as a recurring principal-only payment, and let the schedule do the rest. Run your own loan through the calculator first — enter your balance, rate, and remaining term, add the extra amount, and look at two numbers: the payoff date and the interest saved. Those two figures, for your actual loan, are worth more than any general advice.
This guide is general information, not financial advice. Loan terms, prepayment handling, and your best use of spare cash depend on your situation — a fee-only financial planner can weigh it with you.