How Extra Mortgage Payments Work

Making additional payments toward your mortgage can reduce your principal balance faster. Because mortgage interest is calculated based on the outstanding balance, reducing the principal can also reduce the interest charged over time.

Even a relatively small additional payment each month can make a difference over a long mortgage term. The impact depends on your mortgage balance, interest rate, remaining amortization and the amount of your extra payment.

Example

Imagine you have a $500,000 mortgage and decide to pay an additional $300 every month. The extra money goes toward reducing the mortgage balance, which can potentially shorten the time needed to pay off the loan and reduce total interest.

Use this calculator to experiment with different extra-payment amounts and see how the results change.