Blog
Adding $200/month to a $300,000 mortgage at 7% saves over $100,000 in interest and pays off the loan 6.5 years early. Extra mortgage payments go directly to principal, reducing the balance that accrues interest for the remaining decades of the loan. Even small extra payments compound into massive savings.
| Extra Monthly Payment | Total Interest Paid | Interest Saved | Years to Payoff | Years Saved |
|---|---|---|---|---|
| $0 (minimum only) | $418,527 | — | 30 years | — |
| $100/month extra | $357,898 | $60,629 | 26.5 years | 3.5 years |
| $200/month extra | $316,178 | $102,349 | 23.5 years | 6.5 years |
| $300/month extra | $285,116 | $133,411 | 21.3 years | 8.7 years |
| $500/month extra | $240,341 | $178,186 | 18.2 years | 11.8 years |
| $1,000/month extra | $172,438 | $246,089 | 13.5 years | 16.5 years |
| Biweekly payments | $353,222 | $65,305 | 25.5 years | 4.5 years |
The biweekly row shows payments of $998 every two weeks (half of $1,996) instead of $1,996/month. This results in 13 full payments per year instead of 12 — one extra payment annually without feeling like a big increase.
Mortgage interest is calculated on the outstanding balance. When you pay extra principal:
$200/month extra on a $300,000 mortgage at 7%:
| When You Start Extra Payments | Total Interest Saved | Why |
|---|---|---|
| Year 1 (full 30 years of extras) | $102,349 | Maximum time for compound savings to work |
| Year 5 (25 years of extras) | $82,000 | Still very impactful — most interest is in early years |
| Year 10 (20 years of extras) | $58,000 | Good savings but less time for compounding |
| Year 15 (15 years of extras) | $35,000 | Moderate — you already paid most of the interest |
| Year 20 (10 years of extras) | $15,000 | Minimal — most interest already paid by this point |
Starting extra payments in year 1 saves 6-7x more than starting in year 20. The interest savings front-load because your balance (and therefore monthly interest charges) is highest in the early years.
| Factor | Pay Extra on Mortgage | Invest Instead |
|---|---|---|
| Return certainty | \u2713 Guaranteed savings at your mortgage rate | \u2717 Market returns not guaranteed |
| Expected return | Equal to mortgage rate (e.g., 7%) | ~Historical 7-10% stocks, 4-5% bonds |
| Liquidity | \u2717 Money locked in home equity | \u2713 Investments can be sold |
| Tax benefit | \u2717 Less mortgage interest to deduct | \u2713 401k reduces taxable income |
| Emotional benefit | \u2713 Debt-free sooner, peace of mind | ~Watching market volatility |
| Risk level | \u2713 Zero risk — guaranteed savings | ~Market risk, sequence risk |
Best of both worlds: Contribute to 401k up to employer match first (free money). Then split remaining between mortgage extra and investment accounts based on your risk tolerance and mortgage rate.
This analysis uses fixed-rate mortgage math. Adjustable-rate mortgages (ARMs) have changing interest rates that affect the savings calculation. Also, some loans have prepayment penalties (rare on conventional mortgages but check your loan terms). The investment comparison assumes long-term average returns — in reality, investment returns vary year to year. For a precise comparison for your situation, model both scenarios with actual numbers using a compound interest calculator for investments and a mortgage payoff calculator for extra payments.
Calculate your mortgage payoff with extra payments — see exactly how much you save.
Open Mortgage Calculator