Mortgage Payoff Calculator

Every extra dollar sent to principal removes not just that dollar of debt but all the interest it would have generated for the rest of the term. Early in a mortgage that multiplier is enormous: at 6.5% over 30 years, $100 of principal paid in month one saves roughly $580 of future interest.

That is why $200 a month on a $350,000 mortgage typically cuts the term by six to seven years and saves well over $100,000 — a far bigger effect than the size of the payment suggests. The same $200 applied in year 25 barely moves anything, because there is little remaining interest left to cancel.

Paying half your mortgage payment every two weeks produces 26 half-payments a year, which is 13 full payments rather than 12. The saving does not come from more frequent compounding — it comes from the one extra payment.

You can replicate it exactly by dividing your payment by twelve and adding that amount to each monthly payment, with no enrolment fee and no third-party service. Do check that your servicer applies bi-weekly payments immediately rather than holding them until a full payment accumulates, which removes most of the benefit.

A mortgage is usually the cheapest debt a household will ever hold, and paying it early is a guaranteed return equal to the interest rate. That is a good return — but only relative to the alternatives.

Ahead of it in nearly every case: clearing credit card or other high-rate debt, capturing a full employer 401(k) match, and holding an emergency fund. Money paid into a mortgage is also illiquid — you cannot get it back without selling or borrowing against the house — so a household with three months of expenses and no cash buffer is usually better served building the buffer first.

Three ways to use a lump sum on a mortgage, and they do different things. Overpaying shortens the term and keeps the payment the same. Recasting applies the lump sum to principal and re-amortises the remaining balance over the original term, which lowers the payment but keeps the end date. Refinancing replaces the loan entirely.

Recasting typically costs a few hundred dollars and does not require underwriting or an appraisal, which makes it far cheaper than a refinance when your goal is a lower payment on the same rate — after a bonus, an inheritance or the sale of another property.

Confirm three things with your servicer. First, that extra payments are applied to principal on receipt, not held in suspense or credited toward next month. Second, that no prepayment penalty applies — rare on modern conforming mortgages, but not extinct on non-qualified or older loans. Third, whether escrow is affected, since paying down principal does not reduce the property tax and insurance portion of your payment.

Also remember that overpaying does not reduce next month's required payment. Until the loan is fully repaid you still owe the scheduled amount, so overpayments should come from surplus, not from money you might need back.