What an extra $100, $250 or $500 a month does to a 30-year mortgage
An extra payment toward principal does two things to a fixed-rate mortgage: the loan ends sooner, and less interest is paid over its life. DecisionSheet's mortgage calculator measures both. On the calculator's default house, a $500,000 home with $100,000 down, the loan is $400,000 over 30 years at 6.5%. The required principal and interest is $2,528 a month, and paid on schedule the loan costs $510,178 in interest.
Here is what $100, $250 and $500 a month on top of that payment do to it.
The three levels
| Extra each month | Loan paid off after | Time cut | Interest saved | Interest paid in total |
|---|---|---|---|---|
| None | 30 years | — | — | $510,178 |
| $100 | 26 years 10 months | 3 years 2 months | $63,917 | $446,261 |
| $250 | 23 years 5 months | 6 years 7 months | $131,786 | $378,392 |
| $500 | 19 years 5 months | 10 years 7 months | $205,557 | $304,621 |
Open each level: $100 · $250 · $500. The three differ only in the extra monthly amount; the loan, the rate and every other input are the calculator's defaults.
Both measures rise with the payment. They do not rise in proportion: $500 is 5 times $100, and saves 3.2 times the interest. Per dollar of monthly extra, the interest saved is $639 at $100, $527 at $250 and $411 at $500.
The required payment stays at $2,528 throughout. In this model the extra shortens the loan; it never lowers the monthly bill.
Why early dollars matter more
Each month the model charges one-twelfth of the annual rate on whatever balance is outstanding, and the fixed payment covers that interest first; the rest, plus any extra, reduces principal. A dollar of principal repaid is absent from every monthly interest charge that follows, so the month it is repaid decides how many of those charges it avoids.
The calculator can show this directly, because it accepts a one-time payment and the month to pay it in. Take a single $10,000 with no monthly extra, paid at three points in the loan:
| $10,000 paid in | Loan paid off after | Time cut | Interest saved |
|---|---|---|---|
| Month 1 | 27 years 11 months | 2 years 1 month | $54,998 |
| Month 120 (end of year 10) | 28 years 11 months | 1 year 1 month | $25,298 |
| Month 240 (end of year 20) | 29 years 5 months | 7 months | $8,790 |
Open each: month 1 · month 120 · month 240. The three differ only in the month of payment.
The same $10,000 saves more than twice as much interest paid in month 1 as paid in month 120. Paid in month 1 or 120, it saves more interest than its own size; paid in month 240, it saves $8,790, less than the payment itself, while still ending the loan 7 months early.
The other side of the trade-off
Every dollar prepaid is a dollar not put somewhere else, and the calculator runs that comparison too. It follows the same extra into an investment account at an assumed annual return, then compares the two paths when the original term ends. At the default 8% assumption the calculator's verdict favors investing at all three levels. The break-even return it reports, the return at which the two paths end level, is 6.70% at all three.
That verdict depends entirely on an assumed return, which is an input, not a forecast. Pay off a 3% mortgage or a 7% mortgage early? explains how the comparison works and how the break-even moves with the mortgage rate.
What the calculator does not model
- Prepayment penalties. A prepayment penalty is a fee some lenders charge for paying off all or part of a mortgage early. The Consumer Financial Protection Bureau says it typically applies only to paying off the entire balance within a set number of years, not to small extra payments, and advises checking with the lender (CFPB). The Loan Estimate a lender provides lists whether the loan has one (CFPB Loan Estimate explainer). The model applies no fee.
- Escrow. The calculator adds property tax and insurance to the monthly total it displays, but they have no effect on the payoff date or the interest saved.
- Refinancing, selling or a rate change. The model runs one fixed-rate loan to the end, with the rate unchanged. A sale or refinance before payoff would end the loan on different terms.
- How the lender applies the money. The model credits every extra dollar to principal in the month it is paid.
Assumptions and limits
- Fixed-rate, fully amortizing loan: the standard monthly payment, with interest charged monthly at one-twelfth of the annual rate.
- Extra monthly amounts start in month one and continue every month until the loan is paid off.
- The lump-sum cases carry no monthly extra; each pays $10,000 once, in the month shown.
- Pre-tax: the model does not deduct mortgage interest, which is deductible only for those who itemize (IRS Publication 936), so the interest saved here is before any tax effect.
- Interest saved is in nominal dollars, summed across the life of the loan with no adjustment for inflation or for when the saving occurs.
- The investment comparison assumes a constant return every year, with no taxes or fees on the account.
Method and sources
The model is calculateMortgage in the mortgage payoff vs. invest calculator.
The required payment uses the standard fixed-rate amortization formula; the loan is then run month
by month twice, once on schedule and once with the extra payments applied to principal. Interest
saved is the difference between the two totals, and time cut is the difference between the two
payoff months. Every figure above comes from running the model on the inputs in the scenario links.
- CFPB: What is a prepayment penalty? — the definition, and that penalties typically apply to paying off the whole balance early rather than to small extra payments.
- CFPB: Loan Estimate explainer — the prepayment penalty item on the Loan Estimate.
- IRS Publication 936, Home Mortgage Interest Deduction — mortgage interest is deductible only when deductions are itemized on Schedule A.
Open this scenario in the calculator
All figures on this page come from the Mortgage Payoff vs. Invest calculator. Change any input there and the numbers update.