The short answer
Every extra dollar goes straight off the balance, so all later interest is lower. On a $352,750 loan at 6.4% over 30 years, $200 more a month saves $105,638 and ends the loan 6 years and 1 month early.
Open the free toolSee the steps in action
A short recording of our tool, without sound. Turn on captions for the steps in your language. The written instructions below cover the same process.
Open or download the video · 0.6 MB · 28.03 s
Each step is also explained in writing.
- Start with the loan: price, savings, rate and term.
- In “Extra payments”, enter 200 under “Every month”.
- The green box shows the interest saved and how much sooner the loan ends.
- The chart compares the balance with extra payments and, dashed, without.
- “Lower the payment” keeps the end date and lowers the monthly payment instead.
Why a small extra payment does so much
Interest is charged each month on what you still owe. In the first year of our example, $22,459 of $26,478 goes to interest. An extra payment lowers the balance at once, so every following month carries less interest – and more of the normal payment repays the loan.
That is also why timing matters: an extra payment in year two saves interest for 28 years, one in year twenty only for ten.
What different amounts save
The same loan – $352,750 at 6.4% over 30 years – with a fixed extra amount every month:
| Extra each month | Interest saved | Paid off sooner by |
|---|---|---|
| $100 | $61,060 | 3 years and 6 months |
| $200 | $105,638 | 6 years and 1 month |
| $500 | $189,933 | 11 years and 4 months |
A shorter term or a lower payment?
If you keep the payment, the loan simply ends sooner – the biggest saving. Some lenders instead recalculate (“recast”) the payment after a large extra payment: the end date stays and the monthly payment falls. With $200 a month that way, the payment is $2,189.35 after a year instead of $2,206.47, and you save $40,504.
A recast gives you breathing room; finishing sooner saves more. Ask your lender which it does and whether it charges for a recast.
Try it with your own loan
Enter the loan
In Mortgage Studio, choose your country and enter the price, savings, rate and “Term”. For a loan you already have, enter the balance as the price, 0 as savings and set the buying costs to 0.
Add extra payments
In “Extra payments”, fill in “Every month”, “Every year” or a “One-off amount” with its loan year. If your contract limits prepayments, enter the “Yearly limit”.
Choose the effect
Under “Use extra payments to”, pick “Finish sooner” or “Lower the payment”. The green box shows the interest you save.
Compare the curves
The balance chart draws the plan with extra payments and, dashed, without them. The schedule shows each year.
Before you overpay
- Keep an emergency fund first – money paid into a home is hard to get back quickly.
- Pay off dearer debt such as credit cards before a mortgage at a lower rate.
- Check your loan for a prepayment penalty; most current US mortgages have none, but some do in the first years.
- Write “apply to principal” with an extra payment so the servicer does not treat it as an early regular payment.
Questions you might still have
Is it better to overpay the mortgage or invest?
An overpayment earns exactly your mortgage rate, risk-free. An investment may earn more or less after tax. Many people first build savings for emergencies, then split extra money between both.
Do extra payments lower my monthly payment?
Not automatically. The payment usually stays and the loan ends earlier. Some lenders recast the payment on request after a large extra payment.
Do extra payments end PMI sooner?
Yes. PMI can be cancelled once the balance reaches 80 % of the original value, and extra payments get you there earlier.
Sources & useful details
- Service-public.gouv.fr – Peut-on rembourser son crédit immobilier par anticipation ?
- § 489 BGB – Ordentliches Kündigungsrecht des Darlehensnehmers
- § 502 BGB – Vorfälligkeitsentschädigung
- BOE – Ley 5/2019, reguladora de los contratos de crédito inmobiliario
- CFPB – When can I remove private mortgage insurance (PMI)?
The screen recordings show LoschaZ tools using sample files created for these guides. They are demonstrations, not tests on every phone or promises of an identical result. Examples are not customer files.
