By Meraj Uddin Provat · Last reviewed August 24, 2026 · Editorial Standards
An extra $200 a month on a mortgage does not sound like much next to a $2,022 payment. Over the life of a $320,000 loan at 6.5%, it saves $105,429 in interest and retires the loan six and a half years early. The reason is simple: every extra dollar goes straight to principal, and principal is what interest is charged on.
The numbers: $320,000 at 6.5%, 30 years
| Extra per month | Payoff time | Total interest | Interest saved |
|---|---|---|---|
| $0 | 30 years | $408,142 | — |
| $200 | 23 years, 5 months | $302,714 | $105,429 |
| $500 | 18 years | $222,590 | $185,552 |
Note how non-linear this is. Going from $0 to $200 saves $105K. Going from $200 to $500 — more than double the extra payment — only adds another $80K. The first extra dollars are the most powerful ones, because they attack the balance while it is largest and accruing the most interest.
Why prepayment works so hard early on
In the first years of a 30-year mortgage, the overwhelming majority of each payment is interest, not principal. On this $320,000 loan, the very first payment puts about $1,733 toward interest and only $289 toward the balance. An extra $200 in that month nearly doubles the principal reduction — and every dollar of principal removed early means it never accrues interest again for the remaining 29 years.
This is also why prepaying in year 25 does far less than prepaying in year 2. If you are going to do it, earlier is dramatically better.
Before you start: check these first
- Confirm extra payments go to principal. Many servicers default to applying overpayments toward the next month’s payment instead. Specify “apply to principal” in writing or in the payment portal, then verify it on the next statement.
- Check for a prepayment penalty. Rare on modern conforming loans, but not extinct. Read your note.
- Compare against higher-interest debt. Paying extra on a 6.5% mortgage while carrying 22% credit card debt is backwards — the card wins by a wide margin.
- Fund the emergency fund first. Money paid into a mortgage is very hard to get back out without a refinance or HELOC. Liquidity matters more than a slightly earlier payoff.
- Consider the opportunity cost. If your mortgage rate is well below expected long-term investment returns, investing the surplus may beat prepaying — though prepayment is a guaranteed, risk-free return, which has real value.
Run your own numbers
Balance, rate, term, and extra amount all change the result significantly. The free Mortgage Payoff Calculator shows your exact payoff date, total interest, and savings for any extra monthly amount or one-time lump sum — no signup required. Comparing prepayment against other strategies? The Biweekly Mortgage Calculator and Mortgage Recast Calculator cover the two most common alternatives.
FAQ
How much does an extra $200 a month save on a mortgage?
On a $320,000 mortgage at 6.5% over 30 years, an extra $200 per month saves about $105,429 in total interest and pays the loan off roughly 6 years 7 months early, finishing in 23 years 5 months instead of 30.
Is it better to pay extra on a mortgage monthly or make a lump sum?
Both reduce principal and total interest. Consistent monthly extra payments are usually easier to sustain and start compounding savings immediately, while a lump sum delivers a larger one-time reduction. Applying either earlier in the loan produces far more savings than later.
Do extra mortgage payments automatically go toward principal?
Not always. Many loan servicers apply overpayments toward the next scheduled payment by default rather than reducing the principal balance. Specify that extra payments should be applied to principal, and verify on your next statement.
Should I pay off my mortgage early or invest instead?
It depends on your mortgage rate versus expected investment returns, and your risk tolerance. Prepaying offers a guaranteed return equal to your interest rate with no market risk. Investing may return more over long periods but is not guaranteed. Higher-interest debt should always be paid before either.