Because mortgage interest is charged on the remaining balance, any extra payment applied to principal reduces every future interest charge. This makes extra payments one of the most effective ways to cut the total cost of your loan — and the effect is larger than most people expect.
How an extra payment works
When you pay more than your required monthly amount, the extra goes straight to principal (assuming your lender applies it correctly). That lowers your balance immediately, so next month's interest charge is smaller. More of your regular payment then goes to principal, which lowers the balance further — a compounding effect in your favor.
The numbers on a typical loan
| Extra per month | Payoff time | Months saved | Interest saved |
|---|---|---|---|
| $0 | 30 years (360 mo) | — | — |
| $100 | ~25.75 years (309 mo) | ~51 months | ~$60,213 |
| $200 | ~22.75 years (273 mo) | ~87 months | ~$101,283 |
Adding $100 a month — about $3.30 a day — removes more than four years from this loan and saves roughly $60,000 in interest. Doubling it to $200 removes over seven years and saves about $101,000. The earlier you start, the larger the effect, because the balance is higher and each avoided interest charge is larger.
One-time lump sums
You do not have to commit to a monthly extra. A single lump sum — a bonus, tax refund, or inheritance — applied to principal has the same effect: it drops the balance and shrinks every future interest charge. Our Extra Payments calculator lets you combine monthly extras, annual extras, and one-time lump sums to see the combined impact.
The biweekly approach
A biweekly payment plan pays half your monthly payment every two weeks. Because there are 52 weeks in a year, that works out to 26 half-payments — the equivalent of 13 monthly payments instead of 12. The extra payment goes to principal and accelerates payoff. On the same $280,000 loan, a biweekly schedule pays the loan off in roughly 290 months (about 24 years) and saves about $81,000 in interest.
Is paying extra always the best use of cash?
Not necessarily. If you have higher-interest debt, an insufficient emergency fund, or retirement accounts unmatched by an employer, those may take priority. Paying extra on a 6.5% mortgage is effectively a guaranteed 6.5% return, but it ties up cash in an illiquid asset. Weigh it against your other financial goals.
Calculate Your Extra-Payment Savings