Mortgage Payoff Calculator
See how extra payments shorten your mortgage and cut interest.
- Author
- CentCompass Research Team
- Reviewed by
- Editorial Review
- Last Updated
- Reading Time
- 4 min read
Interest saved
$89,150.77
Time saved
6 yr 9 mo
New payoff time
18 yr 3 mo
Monthly payment
$2,190.58
Principal & interest (no extra)
$1,890.58
Interest on schedule
$287,174.02
Interest with extra
$198,023.25
What is the Mortgage Payoff Calculator?
A mortgage payoff calculator shows what happens when you pay more than your scheduled amount each month: how many years come off the loan and how much interest you never pay. On a long mortgage the effect is larger than most homeowners expect, because every extra dollar of principal stops accruing interest for the entire remaining term — potentially decades.
How the calculation works
The calculator first works out your scheduled principal-and-interest payment from the current balance, rate, and years remaining. It then runs the loan twice: once following that schedule, and once adding your extra amount to every payment. In the second run the balance falls faster, so each month's interest charge is smaller than it would have been, and the loan reaches zero early. The difference between the two runs is the interest saved and the time saved.
The formula
The scheduled payment is M = P · [r(1+r)^n] / [(1+r)^n − 1]. With an extra payment E, each month's principal reduction becomes (M − B×r + E) rather than (M − B×r), where B is the running balance. The schedule is iterated until B reaches zero, which happens in fewer than n months. Interest saved is the total interest on the original schedule minus the total on the accelerated one — the extra payments themselves are not a cost, since they were always going to be principal.
Worked example
On a $280,000 balance at 6.5% with 25 years left, the scheduled principal and interest is about $1,891 a month. Adding $300 brings the payment to roughly $2,191 — and clears the loan 81 months early, nearly seven years, while saving about $89,151 in interest. Those extra payments total around $65,700, so the money is not lost at all; it is redirected from the lender into your own equity, and it buys back almost $89,151 of interest you would otherwise have paid.
Tips
- Instruct your servicer in writing to apply extra amounts to principal, not to next month's payment.
- Extra payments in the early years save far more than the same amount later in the loan.
- A single annual lump sum, such as a bonus, works almost as well as spreading it monthly.
- Weigh prepayment against maxing out tax-advantaged retirement accounts first.
- Prepaying does not lower next month's bill — it shortens the loan, so keep an emergency fund.
Common mistakes
- Assuming extra money automatically reduces principal when servicers may hold it as a prepaid payment.
- Prepaying a low-rate mortgage while carrying credit card debt at several times the rate.
- Draining the emergency fund into home equity, which is expensive and slow to access again.
- Expecting the monthly bill to fall — the payment stays the same, the term gets shorter.
- Forgetting that escrow for taxes and insurance continues regardless of how fast the loan shrinks.
Limitations
This models the principal-and-interest portion of a fixed-rate loan. It excludes escrow for property taxes and insurance, PMI, and HOA dues, none of which change when you prepay. It assumes a constant rate, so it does not describe an adjustable-rate mortgage after its adjustment, and it does not model recasting, refinancing, or the tax treatment of mortgage interest.
Frequently asked questions
How much do extra payments really save?
It depends on the rate and how much time remains, but on a long mortgage the saving is usually many times the extra paid in the first years. Because interest is charged on the balance, removing principal early stops interest accruing on it for the whole remaining term.
Does my monthly payment go down if I pay extra?
No. The scheduled payment stays fixed; what changes is how quickly the balance falls and therefore when the loan ends. If you want a lower payment instead, ask your lender about recasting.
What is mortgage recasting?
Recasting applies a lump sum to principal and then recalculates the payment over the original remaining term, lowering the monthly bill without refinancing. Not all loans allow it and there is usually a modest fee.
Should I pay off my mortgage early or invest?
Prepaying earns a guaranteed return equal to your mortgage rate, while investing offers a higher expected but uncertain return. Many people capture their employer retirement match and clear higher-rate debt first, then weigh prepayment against additional investing.
Do biweekly payments work?
Paying half the monthly amount every two weeks produces 26 half-payments a year, which is 13 full payments rather than 12. That extra payment goes entirely to principal and typically removes several years from a 30-year loan.
Is there a penalty for paying off a mortgage early?
Prepayment penalties are uncommon on modern US mortgages and are restricted on qualified mortgages, but they are not impossible. Check your note before committing to an aggressive payoff plan.
Does prepaying remove PMI?
Reaching 20% equity can end private mortgage insurance, and paying down principal gets you there sooner. On many loans you must request cancellation once you qualify rather than waiting for it to drop automatically.
Should I prepay or keep the mortgage interest deduction?
The deduction only helps if you itemise, and the large standard deduction means most filers do not. Even when it applies, it returns a fraction of the interest, so paying interest purely for the deduction is rarely rational.
When in the loan do extra payments matter most?
Early. At the start, interest consumes most of the scheduled payment and the balance is at its largest, so extra principal has the longest possible time to compound in your favour.
What if I might move before the loan ends?
Prepayment still builds equity you keep when you sell, so it is not wasted. But if a move is likely soon, the interest saving is much smaller, and liquid savings may serve you better than money locked in the house.
Related calculators
Related guides
Sources
- CFPB — Mortgage answers
- CFPB — Loan Estimate Explainer
- Freddie Mac — Primary Mortgage Market Survey
How this page is produced and reviewed
Editorial process. Content is written by the CentCompass Research Team, then checked against the official publications listed above by Editorial Review before it goes live. This page was last reviewed on . See our editorial policy.
How the calculations work. Every result comes from a small, unit-tested calculation engine rather than a spreadsheet or a hardcoded table. Loans use the standard amortization formula, growth uses compound-interest math, income tax applies the federal progressive brackets, and payroll applies Social Security and Medicare rules. Our methodology sets out each one.
Where the figures come from. Tax brackets, standard deductions, FICA parameters, and contribution limits are stored once in a dated registry and read directly by the calculators — the same values appear in the text above, so the two can never drift apart. Each figure records its source, effective tax year, and review status on our data sources page.
Update policy. Regulatory figures are reviewed when the IRS, SSA, or another authority publishes new values — typically each autumn for the following tax year — and again at the scheduled review date recorded for each dataset. Figures awaiting a second reviewer are marked as draft on the data sources page until that check is complete.
Educational purposes only — not financial, tax, or investment advice (disclaimer).