Mortgage Early Payoff Calculator
Find out how much time and interest you save by adding to your monthly payment or making a one-time principal payment.
Mortgage payoff calculator
Balance and interest by year
| Year | Balance at year end | Interest paid that year | Principal paid |
|---|
What different extra payments would do
| Extra per month | Payoff in | Interest saved |
|---|
Assumes the same rate and that every extra dollar is applied to principal.
Why extra payments change the math so much
A mortgage is front-loaded with interest. In the early years most of your payment goes to interest, and only a small slice reduces the balance. Every extra dollar you send to principal removes that dollar from the balance permanently, which means it stops generating interest for the remaining life of the loan. The effect compounds: a modest extra payment in year two saves interest in every month that follows.
On a $300,000 balance at 6.5% with 28 years left, the scheduled payment is about $1,941 a month. Add $200 and you finish exactly six years early and avoid close to $88,000 in interest.
How this calculator works
- It computes your required monthly principal-and-interest payment from the balance, rate, and remaining term.
- It simulates the loan month by month. Each month, interest is charged on the remaining balance, the rest of your payment reduces principal.
- It repeats the simulation twice: once with minimum payments only, and once with your extra monthly amount and any lump sum.
- The difference between the two runs is your months saved and interest saved.
Three ways to pay off a mortgage faster
1. Add to every monthly payment
The simplest method: round up your payment or add a fixed amount each month. Even $50 makes a difference over 30 years, and the habit is easy to keep.
2. Make a lump-sum principal payment
A bonus, tax refund, or inheritance applied directly to principal can remove years from the loan in a single day. Ask your servicer to apply it to principal, not to future payments.
3. Switch to a biweekly schedule
Paying half your monthly amount every two weeks produces 26 half-payments, which equals 13 full payments a year. That extra payment lands on principal once a year.
Prepaying vs. investing the same money
This is the question the calculator cannot answer for you, and the one most articles get wrong. The usual version compares your mortgage rate to the stock market's long-run average and declares a winner. That comparison skips two adjustments that routinely flip the answer: the tax you pay on the investment, and the tax you save on the mortgage interest.
Step one: what does your rate actually cost after tax?
Mortgage interest is only deductible if you itemize, and itemizing only helps to the extent your total deductions exceed the standard deduction — $16,100 for a single filer and $32,200 for a married couple filing jointly in 2026. If your deductions land under that line, the mortgage interest deduction is worth exactly nothing to you, and prepaying a 6.5% loan is a 6.5% after-tax return. That is the common case, and it is the single most overlooked fact in this comparison. Our mortgage interest deduction calculator runs your own numbers if you think you clear the threshold.
The 2025 tax law changed the arithmetic for high-tax states. The state-and-local-tax deduction was capped at $10,000; for 2026 the cap is $40,400, phasing back down toward $10,000 above $505,000 of modified AGI. A homeowner in a high-property-tax county who previously took the standard deduction may now clear it on SALT alone, which makes the mortgage interest deduction live again. On a $300,000 loan at 6.5%, the first year carries roughly $19,400 of interest. In the 24% bracket, itemizing turns that into about $4,650 of tax saved — and cuts the effective cost of the loan to roughly 4.9%.
Step two: what does the investment actually return after tax?
A retirement account is the clean case: no annual tax drag, so the comparison is simply expected return against after-tax mortgage rate. A taxable brokerage account is not clean. Dividends are taxed every year whether you sell or not, and gains are taxed when you eventually sell. Long-term capital gains are taxed at 0% up to $49,450 of taxable income for a single filer and $98,900 for a married couple in 2026, then 15%, then 20% plus the 3.8% net investment income tax above $200,000/$250,000.
| Mortgage rate | After-tax cost, no itemizing | After-tax cost, 24% bracket itemizing | Pre-tax return needed to match (no itemizing) |
|---|---|---|---|
| 3.0% | 3.00% | 2.28% | 3.5% |
| 4.5% | 4.50% | 3.42% | 5.3% |
| 6.5% | 6.50% | 4.94% | 7.6% |
| 7.5% | 7.50% | 5.70% | 8.8% |
Assumes investment gains are long-term and taxed at 15%; the itemizing column assumes you are already above the standard deduction, so each interest dollar is deducted at the 24% marginal rate.
Read that table at the low end and the arithmetic stops being close: a 3% mortgage costs 3% after tax, and a Treasury bill or money market fund may pay more than that without taking any equity risk. Prepaying a sub-4% loan is a decision people make for feelings, not for spread. Read it at 7.5% and the guarantee looks much better than it did at 6.5%, because the return the market has to earn widens faster than the rate itself.
What the arithmetic leaves out
Liquidity. Principal you prepay is gone until you sell the house, take a cash-out refinance at whatever rate exists then, or draw a HELOC that a lender can freeze in exactly the downturn when you need it. A brokerage account is available in two days. That option has a price, and it does not appear in any interest-saved figure on this page.
Inflation. Your payment is fixed in dollars. At 3% inflation, a 6.5% mortgage costs about 3.4% in real terms — the debt is being inflated away while you hold it. Prepaying accelerates a payoff that inflation was already helping with, which is an argument for investing the difference on the portion of the loan you intend to keep for decades.
The order of operations. A dollar of extra principal costs a full dollar of take-home pay, while a dollar into a 401(k) costs about 76 cents of take-home in the 24% bracket. That asymmetry means the retirement account usually wins before the mortgage does: capture the full employer match, clear any debt priced above roughly 8%, hold three to six months of expenses in cash, and only then decide how to split what is left.
Where you are in the loan. Prepayment is worth most early, when the balance is large and interest dominates each payment, and worth least in the final years, when almost every dollar already goes to principal. If you are within a few years of retirement, the case for a smaller fixed payment is usually stronger than the spread — a paid-off house cuts the withdrawal rate you need from a portfolio in a bad market, which is a risk reduction no expected-return calculation captures.
Before you prepay, check these
- Prepayment penalty. Some loans charge a fee for paying early. Read your closing disclosure.
- Emergency fund. Cash in a mortgage cannot be withdrawn quickly. Keep three to six months of expenses liquid first.
- Higher-interest debt. Credit cards and personal loans almost always cost more than a mortgage saves.
- Tax deduction. Mortgage interest is deductible if you itemize, which lowers the effective benefit of prepaying for some borrowers.
- Investment alternative. Compare the after-tax mortgage rate with the after-tax return you expect, not the headline numbers — the section above works through the arithmetic.
Frequently asked questions
How much does an extra $200 a month save?
On a $300,000 balance at 6.5% with 28 years remaining, about $200 a month pays the loan off in 264 months instead of 336 — exactly six years early — and saves around $88,000 in interest. Run your own numbers above; the result depends heavily on your balance and rate.
Should I pay off my mortgage early or invest?
Compare the after-tax mortgage rate with the after-tax return you expect from investing. Prepaying a 6.5% loan is a guaranteed 6.5% return; market returns are not guaranteed. Liquidity and peace of mind also count, so many people do a little of both.
Do extra payments automatically go to principal?
Not always. Some servicers hold extra money as a partial prepayment and apply it to next month's bill, which does not reduce interest. Specify “apply to principal” and check your statement after the first extra payment.
Is there a prepayment penalty?
Most US mortgages do not have one, but some do, particularly certain adjustable-rate or government-backed loans. Confirm with your servicer before making a large payment.
Does this include taxes, insurance, or PMI?
No. This calculator covers principal and interest only. Property taxes, homeowners insurance, HOA dues, and mortgage insurance are separate and do not change when you prepay principal.
Is the interest saved the same as my return?
No, and the difference matters when you compare it to an investment. Interest saved is a nominal total spread across decades; a dollar saved in 2054 is not worth a dollar today. Your real return on prepaid principal is your mortgage rate — 6.5% in this example — which is what an investment has to beat. The big interest-saved number is useful for motivation, not for deciding.
My rate is under 4%. Should I still prepay?
Usually not, on pure arithmetic. A 3% mortgage costs 3% after tax if you do not itemize, and short-term Treasuries and money market funds have at times paid more than that with no equity risk. Check today's yield before deciding. At that rate the case for prepaying is behavioral — a smaller balance feels safer — rather than financial.
Should I prepay the mortgage or max out my 401(k)?
The retirement account usually comes first. A dollar of extra principal costs a full dollar of take-home pay, while a dollar deferred into a 401(k) costs about 76 cents in the 24% bracket, and the match is free money on top. Capture the full match, then compare the after-tax mortgage rate against your expected return for whatever is left.
Does paying off my mortgage lower my property taxes or insurance?
No. Property tax is assessed on the value of the house, not on your loan balance, and homeowners insurance prices the cost to rebuild. Both continue after the mortgage is gone. The only carrying cost that disappears at payoff is principal and interest — plus any mortgage insurance tied to the loan.
Disclaimer: This tool provides estimates for planning purposes only and is not financial advice. Actual payoff dates depend on your servicer's payment application rules, fees, and any rate changes on adjustable-rate loans. Confirm figures with your lender before acting.
Citing this page? FigureMill, “Mortgage Early Payoff Calculator” (last reviewed October 30, 2026). Interest saved, months removed from the term, and the pre-tax investment return that would be needed to beat the after-tax cost of the mortgage. https://figuremill.com/home-tax/mortgage-early-payoff-calculator
Related: Mortgage payment · Mortgage interest deduction · Property tax calculator · Home sale capital gains · All home tax tools