How to Pay Off Your Mortgage Early
Small extra payments go straight to your loan balance and can cut years off a mortgage. On a $300,000 loan at 6.5%, an extra $200 a month saves over $100,000 in interest. Here’s how each method works.
By Bogdan · Updated
Every mortgage payment is split in two: interest (the bank’s fee for lending) and principal (paying back what you borrowed). Anything extra you pay goes straight to principal — and every dollar of principal you pay early stops costing you interest for the rest of the loan.
Explain it like I’m 5
Imagine you owe a friend 100 cookies, and every week they charge you a crumb for each cookie you still owe. If you hand back a few extra cookies now, you owe fewer — so the crumbs you pay every single week after that get smaller too. Paying a little extra early saves a whole pile of crumbs later.
See how much an extra monthly payment saves with the mortgage calculator, or how a lump sum lowers your payment with the mortgage recast calculator.
What extra payments save
A $300,000 mortgage at 6.5% for 30 years costs $1,896.20 a month and about $382,600 in total interest.
| What you do | Paid off in | Interest paid | You save |
|---|---|---|---|
| Normal payments | 30 years | ~$382,600 | — |
| +$100 a month | 26 years | ~$321,600 | ~$61,000 |
| Biweekly (13 payments a year) | ~24 years 2 months | ~$295,400 | ~$87,300 |
| +$200 a month | ~23 years 1 month | ~$279,200 | ~$103,400 |
| +$500 a month | 17½ years | ~$202,900 | ~$179,800 |
The earlier in the loan you pay extra, the more it saves, because early payments are mostly interest.
Five ways to pay it off faster
- Add a fixed amount each month. Even $50 helps. Set it up automatically so you don’t have to think about it.
- Make one extra payment a year, or split it into 12 and add it to each payment. Same result as biweekly, no fees.
- Put windfalls toward it — tax refunds, bonuses, gifts.
- Recast after a lump sum if you’d rather lower your required payment. It saves less interest than keeping your old payment, but gives you breathing room. See recast vs. refinance.
- Refinance to a shorter term (like 15 years) if rates allow. You’ll get a lower rate but a much higher required payment.
When not to rush
- You don’t have an emergency fund. Money in your house is hard to get back out quickly.
- You have higher-interest debt like credit cards — pay that first.
- You’re missing a 401(k) match — that’s an instant 50% or 100% return.
- Your mortgage rate is low (say 3%) and safe savings pay more.
Common mistakes
- Not marking payments “principal only.”
- Paying for a biweekly program — many charge setup or per-payment fees for something you can do yourself.
- Draining savings to pay down the loan, then needing a credit card for an emergency.
Frequently asked questions
How much does an extra $100 a month save on a mortgage?
On a $300,000, 30-year mortgage at 6.5%, an extra $100 a month pays it off about 4 years early and saves roughly $61,000 in interest. An extra $200 a month saves about $103,000 and finishes almost 7 years early.
Do biweekly mortgage payments really help?
Yes, because paying half your payment every two weeks adds up to 13 full payments a year instead of 12. On a $300,000 loan at 6.5%, that pays it off nearly 6 years early. You get the same effect by adding one-twelfth of your payment each month — without paying any biweekly program fee.
Should I pay off my mortgage early or invest?
Compare your mortgage rate with what you could reasonably earn. Paying extra on a 6.5% mortgage is a guaranteed 6.5% return. Investing may earn more over time but isn’t guaranteed. Most people should first get any 401(k) match, pay off higher-interest debt and build an emergency fund.
Is there a penalty for paying off a mortgage early?
Most US home loans made today have no prepayment penalty, but some older or non-standard loans do. Check your loan documents or ask your servicer before sending large extra payments.
How do I make sure extra payments go to principal?
Mark the extra amount as ‘principal only’ when paying online or on the payment slip, then check your next statement. Otherwise the servicer may treat it as an early payment of next month’s bill.
This article is for general education and is not financial, investment or tax advice. Rates, rules and limits change; check current terms with your bank or the IRS. See our disclaimer.