See how extra loan payments reduce interest and shorten payoff time.
Extra principal payments reduce the balance faster, shortening the term and cutting total interest at the same rate.
Adding $200/month to a $300,000 30-year loan at 6.8% can cut the term by about 7 years and save over $90,000 in interest.
Every extra dollar above the required payment goes straight to principal, reducing the balance on which future interest is charged.
Some loans charge prepayment penalties, and tying up cash in home equity reduces liquidity. Check your loan terms first.
If your expected investment return exceeds the loan rate, investing may build more wealth. If the loan rate is higher, paying it down is a guaranteed return.
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