Adding $100 a month to a $300,000 mortgage at 5% over 25 years saves $26,005 in interest and cuts 2.5 years off the loan. At $500 a month the saving is $87,713.
Why extra payments work
Every extra dollar goes straight to the principal, so the next month's interest is charged on a smaller balance. The saving compounds: early extra payments remove interest for the rest of the loan.
The figures below use a $300,000 mortgage at 5% over 25 years, which is 300 scheduled payments, with a fixed extra amount added every month.
What different amounts save
An extra $100 a month saves $26,005 and shortens the loan by 2.5 years. Doubling it to $200 saves $46,351 and 4.5 years, more than double the interest, because the extra payments also compound.
At $500 a month the loan is paid off in 195 months and saves $87,713, or 8.8 years sooner.
Check the details with your lender
Enter your own balance, rate, term and extra amount in the extra mortgage payment calculator to see your saving. Some lenders limit prepayments or charge a penalty, so confirm the rules before committing.
| Extra per month | Interest saved | Years saved |
|---|---|---|
| $100 | $26,005 | 2.5 |
| $200 | $46,351 | 4.5 |
| $300 | $62,764 | 6.2 |
| $500 | $87,713 | 8.8 |
FAQ
Is it better to pay extra every month or once a year?+
Earlier is better, since each dollar stops accruing interest sooner. A steady $100 a month saves $26,005 here; a lump sum saves most when paid early in the loan.
Do extra payments lower the monthly payment?+
Usually not. They shorten the loan instead: $500 extra a month ends it after 195 months rather than 300.