Why Extra Payments Are So Powerful
Every dollar of extra payment goes directly to principal — it doesn't get split between principal and interest like your regular payment does. And because it reduces your balance immediately, it also reduces the interest charged on every future payment.
This creates a compounding effect: a $100 extra payment in month 1 doesn't just save you $100 — it saves you the interest that would have been charged on that $100 for every remaining month of the loan.
A Concrete Example
Take a $300,000 loan at 6.75% for 30 years:
The returns are extraordinary. That $200/month costs you $52,800 total over 22 years — and saves you $115,000. That's a 118% return on your extra payments.
When to Start
The earlier, the better. Extra payments in the first 5 years save dramatically more than the same payments starting in year 15, because your balance is higher and there are more remaining months of compounding savings.
But even starting late helps. If you're 10 years into a 30-year loan and start adding $200/month, you still save tens of thousands.
Strategies That Work
One Caution
Extra mortgage payments make the most sense when you've already:
If your mortgage rate is 6.75% but you're carrying credit card debt at 22%, pay off the cards first.
Try It Yourself
Load the Extra Payment Impact template to see a pre-built comparison, or open any scenario and adjust the "Monthly Extra Payment" slider to see the savings update in real time.