Home Payoff Calculator

Making extra payments on your mortgage is one of the most effective ways to build wealth and reduce debt. Even small additional payments can save you tens of thousands of dollars in interest and shave years off your loan.

Here's why extra payments are so powerful: mortgage interest is calculated on the remaining balance. When you pay extra, 100% of that extra amount goes directly to reducing the principal. This means every future payment has less interest and more principal, creating a compounding effect that accelerates your payoff.

For example, on a $250,000 mortgage at 6.5% with 25 years remaining, adding just $300/month saves approximately $80,000 in interest and pays off the loan nearly 9 years early.

• Bi-weekly payments: Instead of 12 monthly payments, make 26 half-payments. This effectively adds one extra full payment per year, reducing a 30-year mortgage by about 4-5 years.
• Round up payments: If your mortgage payment is $1,847, round up to $2,000. The extra $153/month adds up significantly over time.
• Apply windfalls: Put tax refunds, bonuses, and other unexpected income toward your mortgage principal.
• Refinance to a shorter term: If rates have dropped, refinancing from a 30-year to a 15-year mortgage dramatically reduces total interest, though monthly payments will be higher.
• Recast your mortgage: After making a large lump-sum payment, some lenders will recast (re-amortize) your loan to lower the monthly payment while keeping the same term and rate.

While paying off your mortgage early saves interest, it is not always the best use of your money. Consider these factors:

• Interest rate vs investment returns: If your mortgage rate is 3.5% and you can earn 8-10% in the stock market, you might build more wealth by investing the extra money instead. However, at higher mortgage rates (6%+), the guaranteed "return" of paying off debt is very attractive.
• Emergency fund first: Before making extra mortgage payments, ensure you have 3-6 months of expenses saved. Liquidity matters — you cannot easily access equity in an emergency.
• High-interest debt: Pay off credit cards, personal loans, and other high-interest debt before accelerating your mortgage.
• Tax deduction: Mortgage interest may be tax-deductible, which effectively lowers your rate. Factor this in when comparing to investment returns.
• Peace of mind: For many people, the psychological benefit of owning their home outright is worth more than the mathematical optimal strategy.