How to Pay Off Your Mortgage Early (and How Much You'll Save)
See how extra monthly payments shorten your mortgage and cut interest, why starting early matters, and whether to pay off early or invest.
Published
Free tool: Mortgage Payoff CalculatorPaying off a mortgage early saves interest and frees up your budget years sooner. The simplest way is to add a little to every monthly payment, and the earlier you start, the more it saves. This guide shows how much extra payments save with a worked example, and when paying early makes sense, using the free Mortgage Payoff Calculator.
Why extra payments save so much
Each monthly payment covers that month's interest first, and the rest reduces the balance. An extra payment goes entirely to the balance, so every month after that you're charged interest on a smaller amount. Those savings build for the rest of the loan, which is why even modest extra payments can cut years off a mortgage.
Example: $250,000 with 25 years left
A $250,000 balance at 4% with 25 years remaining has a payment of about $1,320 a month and $145,878 of interest still to pay. Here's what adding a fixed amount every month does:
| Extra each month | Paid off in | Interest saved |
|---|---|---|
| $0 | 25 years | — |
| $100 | 22 years 2 months | $18,619 |
| $300 | 18 years 2 months | $44,176 |
| $500 | 15 years 5 months | $60,998 |
At higher rates the savings are bigger: at 6.5%, the same $300 a month saves about $85,737 and pays the loan off in 17 years 8 months.
Start as early as you can
Timing matters as much as the amount. The same $300 a month on the 4% loan:
- Starting now: saves $44,176.
- Starting in year 5: saves $30,359 and pays off in 19 years 7 months.
- Starting in year 10: saves $17,012 and pays off in 21 years 2 months.
Early in a loan, most of each payment is interest, so extra principal paid then has the most time to save interest.
Other ways to pay it off faster
- Biweekly payments: half your payment every two weeks adds up to one extra payment a year; see Biweekly Mortgage Payments: How Much Do They Really Save?
- Lump sums: a bonus or tax refund put toward principal works like a large one-off extra payment.
- Refinancing to a lower rate or a shorter term; see When Does Refinancing Your Mortgage Make Sense?
- Recasting: some lenders will lower your payment after a large lump sum, for a small fee.
Whatever you do, ask your servicer to apply extra money to principal, and check your loan documents for a prepayment penalty. Most US mortgages made today don't have one.
Pay off early or invest?
Paying down a mortgage earns a guaranteed return equal to its interest rate. Before putting extra money into a mortgage, it usually makes sense to:
- Keep an emergency fund of several months' expenses.
- Pay off higher-interest debt such as credit cards.
- Get any employer retirement match.
After that it's a trade-off: investing may earn more over time but isn't guaranteed, while paying off the mortgage is a sure saving and lowers your costs for good. Many people do some of both.
How to use the Mortgage Payoff Calculator
- Open the Mortgage Payoff Calculator.
- Enter your current loan balance, the interest rate and the remaining term in years. Your latest mortgage statement shows the balance. The calculator works out the principal-and-interest payment from these, so it should be close to your current payment before taxes and insurance.
- Enter the monthly extra payment and the year it starts (1 means right away).
- Read the results: the monthly payment, the new payoff time, the total interest and the interest savings, with a chart of your balance over time, a breakdown of where your payments go and an annual payoff summary that marks the year the loan is paid off.
Frequently asked questions
How much faster will I pay off my mortgage with extra payments?
It depends on the balance, the rate and the amount. On $250,000 at 4% with 25 years left, $300 extra a month pays it off in about 18 years 2 months instead of 25.
Is it better to make extra payments early in the loan?
Yes. Extra principal paid early saves interest for more years. Starting $300 a month in year 10 instead of right away cuts the savings from $44,176 to about $17,012 in the example.
Do extra payments lower my monthly payment?
No. On a standard fixed-rate mortgage, the required payment stays the same and the loan ends sooner. Some lenders will recast the loan to a lower payment after a large lump sum.