Mortgage Payoff / Prepayment Calculator
See how much extra principal each month saves you in years and total interest.
Inputs
Results
Sam's Take
Whether to prepay vs invest the extra money is one of the most-debated questions in personal finance, and the answer depends on your mortgage rate vs. expected investment returns. At 4% mortgage rate, prepaying is usually a losing trade — you'd outperform with index funds at 7%. At 7% mortgage rate, prepaying is competitive with most investment options on a risk-adjusted basis. At 8%+, prepaying often beats investing. The other consideration: prepayment is a guaranteed return, no taxes, no risk. For an ADHD operator, the simplicity of 'just pay extra and forget it' has real psychic value beyond pure math.
Related Calculators
How paying extra on your mortgage actually works
Every extra dollar you put toward principal does two things: it shrinks the loan balance immediately, and it kills all the interest you'd have paid on that dollar for the rest of the loan. On a 30-year loan, an extra dollar of principal in year 1 saves you somewhere between $0.50 and $1.00 of interest over the life of the loan, depending on your rate. Stack those savings up across consistent monthly extra payments, and a 30-year loan can finish in 22-25 years instead.
Four ways to do it
- Bi-weekly payments. Pay half your payment every 2 weeks instead of the full payment every month. There are 26 two-week periods a year, which means 13 full monthly payments instead of 12. That one extra payment a year, on autopilot, cuts about 5 years off a 30-year loan.
- Round up. If your payment is $2,180, just pay $2,250 every month. Easy to remember, not a big lifestyle hit, and the impact compounds across 30 years.
- Annual lump sum. Throw your tax refund or year-end bonus directly at principal. One payment a year, low burden, high impact.
- Match a bill that just ended. When you pay off the car or cancel a subscription, redirect that exact monthly amount to mortgage principal. You were already used to spending it, so you don't feel anything.
The honest debate: prepay vs invest
Whether you should pay down the mortgage or put that money in the stock market is one of the most argued-about questions in personal finance. The honest answer depends on your rate.
- Mortgage at 4% or below: investing usually wins on paper. Long-term S&P 500 returns average 7-10%, so you'd come out ahead putting the extra dollars into index funds.
- Mortgage at 6-7%: roughly a tie on a risk-adjusted basis. Prepayment is a guaranteed return (no market risk, no taxes); investing is higher expected return but with volatility.
- Mortgage at 8%+: prepayment usually beats investing on a risk-adjusted basis.
One thing the spreadsheet doesn't capture: the psychic value of being out of debt. For some people, "just pay extra and forget it" is worth more than the marginal expected return from investing. That's a real factor, not a soft one.
When NOT to prepay
Don't put extra money on the mortgage if any of these are true:
- You don't have a 6-month emergency fund in cash yet — that comes first.
- Your employer is matching 401(k) contributions you're not maxing — that's free money, take it.
- You have credit card debt at 18-24% — pay that off first, it's a guaranteed 18-24% return.
- Your mortgage rate is well below expected investment returns and you have the discipline to actually invest the difference (most people don't, but if you do, do that).
- You plan to move or refinance in less than 5 years — the prepayment savings haven't compounded enough yet to matter.