Should You Pay Extra on Your Mortgage?

Paying extra toward your mortgage principal is one of the few guaranteed returns in personal finance. Every extra dollar you pay saves you the interest that dollar would have cost for the rest of the loan. But "guaranteed" doesn't automatically mean "best." Here's how to tell whether it's the right move for you.

What an extra payment actually does

Your monthly payment is fixed, but the split between interest and principal isn't. Each month, interest is charged on whatever balance is left. When you pay extra principal, the balance drops faster, so every future month charges a little less interest and a little more of your regular payment goes to principal. That snowball is why small amounts add up.

On a $300,000 loan at 6.5% for 30 years (a $1,896.20 monthly payment), you'd pay about $382,633 in interest over the life of the loan. Adding just $200 a month pays the loan off 6 years and 11 months early and saves about $103,449 in interest.

See this example in the calculator →

A checklist before you pay extra

Extra mortgage payments are hard to get back out. Your home equity isn't cash, and borrowing against it later costs money. Work through these first:

Emergency fund. Have three to six months of expenses in savings. If you lose your job, your lender still wants the full payment every month, no matter how much extra you paid before.
Employer retirement match. If your employer matches 401(k) contributions, get the full match first. It's an instant 50% or 100% return.
Higher-interest debt. Credit cards, personal loans, and most car loans charge more than your mortgage. Pay those off first.
Your mortgage rate vs. other options. Paying extra "earns" exactly your mortgage rate, risk-free. If your rate is 3%, high-yield savings or long-term investing has a good chance of beating it. If your rate is 7%, the guaranteed return looks a lot more attractive.

When paying extra makes the most sense

Your rate is high compared to what safe savings pays.
You're getting close to retirement and want lower fixed costs once your paycheck stops.
You still pay PMI. Reaching 20% equity sooner lets you drop PMI, which is an extra return on top of the interest saved. See how to get rid of PMI.
You value the peace of mind. Owning your home outright is worth something that doesn't show up in a spreadsheet.

When to hold off

You don't have an emergency fund yet.
You have a very low rate (for example, from 2020–2021) and aren't maxing out retirement accounts.
You may move or refinance in the next few years. Extra payments still lower your balance, but the long-term interest savings mostly disappear when the loan is paid off by a sale or refinance.

Earlier is better

The same dollar saves more interest the earlier you pay it, because it has more years to avoid interest. On the $300,000 example above, a one-time $10,000 payment in year one saves about $52,048 in interest. The same $10,000 paid in year 15 saves about $16,371.

Practical tips

Mark it "principal only." Most servicers have a separate box or field for extra principal. Check your next statement to confirm it went to principal and wasn't held as an early payment.
Check for a prepayment penalty. These are rare on modern home loans, but your loan documents will say for sure.
You can change your plan any time. Paying extra is voluntary. You can start, stop, or change the amount whenever your budget changes. That's what the change points in the calculator are for.
Itemizing? If you deduct mortgage interest, paying less interest means a slightly smaller deduction. Most households take the standard deduction, so this usually doesn't matter.

This article is general information, not financial advice. Examples are rounded and assume a fixed-rate loan; your lender's numbers may differ slightly.