MORTGAGE GUIDE
Is paying extra on your mortgage worth it?
Additional principal reduces the balance that generates future interest. It also leaves you with less liquid cash. The right decision depends on your loan contract, cash reserves, other borrowing costs and alternatives.
A worked payment example
For a $320,000 balance at 6% nominal annual interest over 30 years, the standard principal-and-interest payment is about $1,918.56 monthly. Paying $200 more each month reduces the balance faster and avoids future interest. The exact savings and payoff date depend on when additional payments are made.
Try the mortgage calculator with your own numbers to compare the standard schedule with monthly, annual or one-time additional principal.
How does $200 extra per month compare at different rates?
These figures are calculated using the same repayment engine as our mortgage tool. All scenarios borrow $320,000 for 30 years, with a fixed nominal annual rate and $200 extra principal starting with the first payment. Expenses and tax effects are excluded.
| Annual rate | Standard interest | Interest saved with $200 extra | Months saved |
|---|---|---|---|
| 5% | $298,419 | $70,376 | 74 |
| 6% | $370,682 | $92,845 | 77 |
| 7% | $446,428 | $118,972 | 81 |
Different rates change both the required loan payment and interest savings. All examples assume extra payments reduce principal immediately and there are no prepayment penalties.
What should you check before paying early?
- Whether the servicer applies extra money directly to principal.
- Whether the mortgage has prepayment penalties or limits.
- Whether you have emergency savings and higher-interest debt.
- Whether you value greater monthly flexibility more than earlier payoff.
What a savings estimate does not mean
An interest-saving projection is not an investment return or tax recommendation. The example assumes a constant loan rate, monthly interest and payments, and no refinancing. It excludes opportunity cost, tax consequences and changes to insurance or property taxes.
When does paying earlier help the most?
All else equal, payments made sooner reduce the balance for more future months. The calculator can test an extra payment beginning later or a one-time contribution in a chosen payment month. Compare scenarios rather than relying on a generic rule of thumb.