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Tax & Family

Mortgage Payoff Calculator

See exactly how extra payments shorten your mortgage and cut total interest. Compare three strategies — biweekly payments, fixed monthly overpayment, and one-time lump sum — and choose the one that fits your cash flow.

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Estimate only. Confirm with your servicer whether extra payments apply to principal (recommended) vs next month's payment. Some servicers require explicit principal-reduction instructions.

How extra payments compound against your principal

Every dollar you pay above your scheduled monthly payment reduces your loan's principal balance — and that reduction compounds because every future interest charge is calculated on a smaller balance. The effect is dramatic: a $300/month overpayment on a $280,000, 30-year, 6.5% mortgage saves roughly $86,000 in interest and pays off the loan about 7 years early.

Three strategies compared

  • Fixed monthly overpayment — The most flexible strategy. You commit a fixed additional amount to principal each month, and you can stop or adjust if circumstances change.
  • Biweekly payments — You pay half your monthly payment every two weeks. Because there are 26 biweekly periods in a year, you make one extra monthly payment per year with minimal monthly cash-flow impact.
  • One-time lump sum — Best for bonus-driven cash flow or windfalls (inheritance, sale of asset). The lump sum immediately reduces principal and compounds for the remaining life of the loan.

The opportunity cost question

Before accelerating mortgage payoff, compare your mortgage rate to the after-tax return you could earn by investing the same dollars. If your mortgage rate is 6.5% and your expected after-tax investment return is 7%, investing mathematically wins over the long run — but the certainty of a paid-off home has psychological value that pure math cannot capture.

For a deeper comparison of payoff strategies, including recasting vs refinancing, see our mortgage payoff strategy guide.

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Common Questions

Frequently asked questions

Q: How do biweekly payments work?

With a biweekly payment plan, you pay half your monthly mortgage payment every two weeks instead of one full payment each month. Because there are 52 weeks in a year, you end up making 26 half-payments — equivalent to 13 full monthly payments — so one extra payment is applied to principal each year. On a $300,000 30-year fixed mortgage at 7%, biweekly payments typically shorten the loan by about 5 years and save roughly $80,000 in lifetime interest. Beware of third-party services that charge setup fees ($300–$500) and per-payment charges for something you can usually arrange for free by adding extra principal to your regular monthly payment.

Q: Should I recast or refinance my mortgage?

Recasting is best when you already have a favorable rate and want to lower monthly payments after a windfall, because it preserves your existing loan terms for a flat fee (typically $150–$500). Refinancing makes sense when interest rates have dropped at least 0.75–1 percentage points below your current rate, allowing you to lower both your rate and monthly payment simultaneously — though closing costs average 2–5% of the loan balance. Recasting does not require credit approval or a new appraisal, while refinancing does, making recasting easier for homeowners with a recent rate-lock at historically low 2020–2021 rates. If you need cash from your equity or want to remove PMI, refinancing is the only path; recasting cannot change your rate, term, or cash out.

Q: How much faster can I pay off my mortgage with extra payments?

Adding $200 per month in extra principal to a $300,000 30-year mortgage at 7% shortens the loan by about 7 years and saves roughly $90,000 in interest. Earlier payments have outsized impact because each dollar of principal avoided stops compounding interest for the remaining life of the loan — a single extra $2,500 payment made in year one of a 30-year 7% mortgage saves about $13,000 in lifetime interest. Even small amounts compound dramatically: $100/month extra on a $250,000 loan at 6.5% cuts the term by roughly 5 years and saves $58,000. The key is ensuring your servicer applies the extra as a principal reduction, not an early next month's payment.

Q: Is it better to invest or pay off my mortgage early?

The math typically favors investing when expected returns exceed your mortgage rate, but the comparison must account for risk, taxes, and behavioral factors. If your mortgage rate is 3% and you expect 7–8% long-term returns from diversified equities, investing usually wins — particularly inside tax-advantaged accounts like a 401(k) or IRA where contributions are pre-tax. For high-rate mortgages (6–7%+), the guaranteed, risk-free return from paying down principal often beats conservative investing, especially given that the 2017 TCJA's higher standard deduction means fewer than 10% of households itemize and deduct mortgage interest. A balanced approach — funding tax-advantaged retirement accounts up to the employer match, then splitting extra cashflow between investing and mortgage principal — hedges against both rate environments.

Q: Do extra payments automatically go to principal?

No — most servicers default to applying any amount above your scheduled payment to future months' interest and principal, effectively prepaying your bill rather than accelerating payoff. Under the CFPB's mortgage servicing rules (12 CFR 1024.36) and the CARES Act, servicers must honor explicit instructions to apply additional funds as a principal-only reduction, but you must make that designation clearly, typically via a "principal-only" checkbox on the payment coupon or a designated option in the online payment portal. Always verify the following month's statement shows the extra as a principal reduction, not a future-dated payment. If your servicer ignores the instruction, file a complaint with the CFPB — they are required to acknowledge and investigate within specific timelines.

Q: What is the difference between mortgage recasting and refinancing?

Recasting (re-amortization) keeps your existing mortgage intact — same interest rate, same lender, same maturity year — but lowers your monthly payment after you make a large principal paydown (usually at least $5,000–$10,000) and pay a flat fee of $150–$500. Refinancing replaces your old loan with a brand-new mortgage, allowing you to change the rate, term, or loan type, but requires full underwriting, a credit check, appraisal, and closing costs averaging $5,000+ (2–5% of the loan). Recasting is unavailable on FHA, VA, and USDA loans, while refinancing works across all loan types. Recasting preserves a low existing rate (valuable in a rising-rate environment) and never resets the loan to 30 years unless you request it; refinancing restarts amortization, which can actually slow wealth-building if you continually extend the term.