Quick answer
Extra principal lowers the balance immediately, so less interest accrues every month after. On a $325,000 30-year loan at 7.24%, paying $200 extra each month saves about $126,421 in interest and pays the loan off 6 yr 10 mo early. Tell your servicer to apply the extra to principal.
Key facts
7.24%
30-year fixed average (default rate)
Freddie Mac Primary Mortgage Market Survey · Week of Oct 29, 2026
How amortization works
Each monthly payment on a fixed-rate loan is the same, but its make-up changes. Interest is charged on the balance still owed, so early payments are mostly interest and later ones mostly principal. In the first year of a $325,000 loan at 7.24%, $23,427 of the $26,578 you pay goes to interest and only $3,152 to principal.
An extra payment skips the interest entirely: it lowers the balance the next month’s interest is calculated on. That is why a modest amount early in the loan saves far more than the same amount near the end.
What different extra payments save
| Extra principal | Interest saved | Paid off sooner |
|---|---|---|
| $100 a month | $74,741 | 3 yr 11 mo |
| $200 a month | $126,421 | 6 yr 10 mo |
| $500 a month | $219,166 | 12 yr 3 mo |
| One extra payment a year | $114,954 | 6 yr 2 mo |
“One extra payment a year” has the same effect as paying half the monthly amount every two weeks (26 half-payments make 13 full ones), without needing a biweekly plan.
Before you prepay
Emergency savings
Money in the house is hard to get back out quickly. Keep a cash cushion first.
Higher-rate debt
Paying off a credit card at a higher rate saves more than prepaying the mortgage.
Retirement matches
An employer match on retirement contributions is usually worth more than mortgage interest saved.
Prepayment penalties
Some lenders charge a fee if you pay off all or part of the loan early, usually within the first few years. Check your loan documents or ask your servicer.
How the servicer applies it
Ask for extra money to go to principal, not to next month’s payment, and check your statement.
Extra payments vs a shorter loan
A 15-year loan forces the faster payoff and usually carries a lower rate — 6.6% versus 7.24% in Freddie Mac’s latest survey — but the higher required payment leaves no flexibility in a tight month. Prepaying a 30-year loan gets part of the benefit while keeping the lower required payment. The payment calculator compares the two terms side by side.
Frequently asked questions
How much do extra mortgage payments save?
It depends on the balance, rate and how early you start. On a $325,000 30-year loan at the current average, $200 a month extra saves about $126,421 in interest.
Is it better to pay extra monthly or once a year?
Monthly extra saves slightly more because each payment starts reducing interest sooner, but the difference is small. Choose the pattern you can keep up.
Do biweekly payments pay off a mortgage faster?
Yes, because 26 half-payments equal 13 full payments a year — one extra payment. You can get the same result by adding one-twelfth of a payment each month.
Does paying extra lower my monthly payment?
No. On most fixed-rate loans the required payment stays the same and the loan ends earlier. Some servicers offer a recast that re-spreads a large lump sum over the remaining term; ask yours about its terms.
Should I pay off my mortgage early or invest?
Prepaying earns a guaranteed return equal to your mortgage rate. Investing may earn more or less. Many people first build savings and capture any employer retirement match.
Sources
- Freddie Mac Primary Mortgage Market Survey — 30-year fixed rate, national weekly average; 15-year fixed rate, national weekly average (Week of Oct 29, 2026)
- US Census Bureau, American Community Survey 2024 1-year — Median value of owner-occupied homes (2024 ACS 1-year)
- CFPB — Ask your servicer to cancel PMI at this share of original value; PMI ends automatically at this share of original value (Oct 28, 2026)
- CFPB — Longest term allowed on a Qualified Mortgage (Jan 7, 2025)
- CFPB: What is a prepayment penalty?
Last reviewed Figures are checked against the sources above. Read our editorial policy. This page is general information, not financial advice — see the disclaimer.