Phase 2 · Wealth & Leverage
Mortgage Paydown Calculator
A little extra each month quietly erases years of payments. See exactly how much interest you kill and when you'd actually own your home outright.
How much do extra mortgage payments actually save?
Far more than the extra itself, because every additional dollar goes entirely to principal — and each dollar of principal removed stops accruing interest for the whole remaining term. The effect is largest early, when almost all of a normal payment is interest, and shrinks as the balance falls.
- Each month: interest = balance × r, then principal = payment + extra − interest. The extra never touches interest, so it retires balance directly.
- Worked example (defaults on this page): $400,000 at 6.5% over 30 years costs $510,178 in interest. Adding $300/month cuts that to $360,597 — you save $149,581.
- That $300 also ends the loan 91 months (7.6 years) early, at month 269 instead of 360. Total extra paid is about $80,700, returning nearly twice itself.
- Compare against your other options honestly: prepaying is a guaranteed return equal to your mortgage rate, so at 6.5% it beats savings but may not beat long-run market returns or higher-rate debt.
Balance: standard vs accelerated
Under the hood
The math, fully exposed
We compute the standard payment, then amortize month by month — twice (with and without your extra) — and compare:
Monthly rate r = APR ÷ 12
Monthly payment = P × r × (1+r)n ÷ ((1+r)n − 1)
Each month: interest = balance × r; principal = payment + extra − interest; balance −= principal
Interest saved = total interest (base) − total interest (with extra)
- Why extra payments compound: reducing principal lowers next month's interest, so an ever-larger share of every payment hits principal. The benefit accelerates over time.
- Front-loaded interest: early in a mortgage almost all of your payment is interest. Extra principal in the first years is dramatically more powerful than the same amount later.
- Guaranteed return: paying down a 6.5% mortgage is a risk-free 6.5% return on that money — rare and valuable in a world of uncertain markets.
Your directives
What to do next, based on your numbers
Adjust the sliders to generate tailored recommendations.
Answers
Frequently asked questions
How does paying extra each month pay off a mortgage faster?
Every extra dollar goes straight to principal, the balance interest is charged on. A smaller balance means less interest next month, so more of your normal payment also attacks principal — a compounding effect. Even a modest extra payment can cut years off the loan and tens of thousands in interest.
Is it better to pay down my mortgage or invest the money?
Compare your mortgage rate to your expected after-tax investment return. Paying down a 7% mortgage is a guaranteed 7% return; if you expect more than that from investing (after tax) and can stomach the risk, investing may win. Paying down is the risk-free, guaranteed choice — this tool shows exactly what that guaranteed return is worth.
How is a mortgage payment calculated?
The standard monthly payment formula is P × r × (1+r)n ÷ ((1+r)n − 1), where P is the loan amount, r is the monthly interest rate (annual ÷ 12), and n is the number of months. We then amortize month by month, adding your extra payment to principal each period.
Should I make extra payments or refinance to a shorter term?
Extra payments give you flexibility — you can stop any time. A shorter-term refinance locks in a lower rate but commits you to the higher payment. If rates today are below your current rate, refinancing and keeping your old payment is often the most powerful combination.