Making extra payments toward your mortgage principal is one of the most effective ways to save money on interest and become debt-free faster. Even small additional amounts can have a dramatic impact because they directly reduce the principal balance, which in turn reduces the interest charged in every subsequent month.
How it works: When you make your regular mortgage payment, the interest portion is calculated based on your remaining balance. Any extra payment goes directly toward reducing the principal. Because interest is calculated on a smaller balance the next month, more of your regular payment goes toward principal, creating a compounding effect that accelerates payoff.
The formula: Each month, Interest = Remaining Balance × (Annual Rate ÷ 12). The remainder of your payment (regular + extra) goes to principal. By recalculating this each month with a reduced balance, the calculator determines your new payoff date and total interest savings.
Common strategies: The most popular approach is adding a fixed amount each month (e.g., $100-500 extra). Another strategy is making one extra payment per year (dividing your monthly payment by 12 and adding it to each payment). Bi-weekly payments (half your monthly payment every two weeks) effectively create 13 full payments per year instead of 12.
That $200 extra per month saves you over $39,000 in interest and pays off your home years earlier. Try different amounts to see the impact.