Extra Mortgage Payments: How Much Paying Extra Saves

Extra mortgage payments go straight to your principal balance, so you pay less interest and finish the loan sooner. At Freddie Mac's average 30-year rate of 7.18% for the week of November 5, 2026, an extra $200 a month on an example $400,000 loan saves about $132,202 in interest and ends the loan almost six years early.

Here is how it works, what it can save, the rules on prepayment penalties, and how to make sure your extra money lands in the right place.

What happens when you make an extra mortgage payment?

Each monthly payment on a fixed-rate loan has two parts: interest and principal. Interest is figured on the balance you still owe. Early in a loan, most of the payment is interest.

On the example below, the first payment is $2,709.74. Of that, $2,393.33 is interest and only $316.41 pays down the loan. That split is why extra principal early on has such a big effect.

When you pay extra toward principal:

Your balance drops right away by the extra amount.
Next month's interest is figured on that lower balance.
More of each regular payment goes to principal from then on.
The loan is paid off before its scheduled end date.

Your required payment usually stays the same. The savings show up as fewer payments, not a smaller bill each month.

How much do extra payments save at today's rate?

This is an example only. It uses a $400,000, 30-year fixed loan at 7.18%, the Freddie Mac Primary Mortgage Market Survey average for the week of November 5, 2026. The monthly payment is principal and interest only, with no taxes or insurance.

Example: $400,000 at 7.18%, 30 years	Payoff time	Total interest	Interest saved	Time saved
Regular payment of $2,709.74	30 years	$575,505	—	—
Plus $100 a month	26 years, 9 months	$499,223	$76,283	39 months
Plus $200 a month	24 years, 2 months	$443,303	$132,202	70 months
Plus one extra payment each year	23 years, 10 months	$436,593	$138,913	74 months

The math assumes the extra money is applied to principal the month you pay it, and that the rate never changes. Your results depend on your balance, your rate and how long you keep the home.

After five years, the regular plan leaves a balance of about $377,242. With $200 extra each month, the balance is about $362,856. That is the money you have built up in the home, not cash you can spend.

Is one extra payment a year better than adding a little each month?

They are close. One extra payment a year is $2,709.74 in this example, which works out to about $225.81 a month. That is a bit more than $200, so it saves a bit more.

Pick the one that fits how you get paid:

Monthly extra works well with a steady paycheck. Set it and forget it.
One yearly payment works well with a bonus or tax refund.
Every-two-weeks plans split your payment in half and pay it 26 times a year, which adds up to one extra payment. Ask your servicer if it offers this and whether it charges a fee. You can do the same thing yourself for free with one extra payment a year.

If you would rather lower the rate itself, compare the payment on a shorter loan in our 15-year vs. 30-year mortgage guide.

Can my lender charge a penalty for paying extra?

Some loans have a prepayment penalty. The Consumer Financial Protection Bureau says it is a fee some lenders charge if you pay off all or part of the loan early, that not all mortgages have one, and that small extra principal payments normally do not trigger it. It suggests confirming with your lender.

Federal rules put tight limits on these penalties. Under Regulation Z, 12 CFR 1026.43(g), a prepayment penalty is allowed only on a loan whose rate cannot go up after closing, that is a qualified mortgage, and that is not a higher-priced loan. Even then:

Rule under 12 CFR 1026.43(g)	Limit
Years 1 and 2	Up to 2% of the balance prepaid
Year 3	Up to 1% of the balance prepaid
After year 3	No penalty allowed

A lender that offers a loan with a penalty must also offer a comparable loan without one.

How to check your own loan: the CFPB's Loan Estimate explainer shows that "Prepayment Penalty" appears on page 1 of the Loan Estimate. If it says yes, ask your lender for the details.

How do I make sure the extra goes to principal?

Servicers do not all handle extra money the same way, which is why the CFPB suggests confirming with your lender. To keep it working for you:

Label it. Use the "additional principal" box online or write "apply to principal" on the payment.
Pay your regular amount first. Make the full scheduled payment, then add the extra as a separate principal amount.
Check your statement. Your principal balance should drop by the extra amount.
Keep records. Save confirmations in case you need to ask about a payment.

If your loan was just transferred to a new servicer, wait until the new account is set up. Our guide to when your first mortgage payment is due covers servicing transfers.

Extra payments vs. a recast vs. refinancing

Option	What it does	What happens to your payment
Extra payments	Lowers your balance a little at a time	Usually stays the same; loan ends sooner
Recast	You pay a lump sum, and the servicer re-figures the payment on the new balance	Goes down; rate and end date stay the same
Refinance	Replaces your loan with a new one	Depends on the new rate, term and closing costs

A recast can make sense after a large lump sum, such as money from selling your old home. Our mortgage recast guide explains it. If rates fall later, a refinance may help more; see how soon you can refinance.

Should you pay extra or keep the cash?

Paying extra is a sure return equal to your loan's rate, because every dollar of principal you pay stops costing interest. But once money goes into the loan, you usually cannot get it back without selling, refinancing or borrowing against the home.

Questions many buyers ask themselves first:

Do I have an emergency fund?
Am I carrying higher-rate debt, like a credit card?
Am I getting any employer match on retirement savings?
Do I plan to stay in the home long enough for the savings to add up?

There is no single right answer. A financial professional can help you weigh it for your situation.

What this means for new-construction buyers

Ask before you close. Check page 1 of your Loan Estimate for a prepayment penalty, and ask the lender how extra principal is applied.
Mind the buydown years. If a builder pays for a temporary buydown, like a 2-1 buydown, your payment is lower for the first years. Ask your servicer how extra principal is handled during that time.
Plan for year two. On a new home, the second-year tax bill can be higher than the first, which can raise your escrow. Keep room in your budget before committing to extra payments.
Start small. Even $100 a month made a five-figure difference in the example above.

the principal?

Common Questions

Do extra mortgage payments go to principal?

Usually, if you tell your servicer to apply them to principal. The CFPB advises confirming with your lender how extra payments are handled. Check your next statement to see that the principal balance dropped by the extra amount.

How much does an extra \$100 a month save on a mortgage?

On an example \$400,000, 30-year loan at 7.18%, an extra \$100 a month saves about \$76,283 in interest and pays the loan off 39 months early. Your savings depend on your balance, rate and how long you keep the loan.

Is it better to make one extra payment a year or pay a little more each month?

Both work. In the same example, one extra full payment each year saved about \$138,913, while \$200 more each month saved about \$132,202. The yearly extra payment adds a bit more money each year, which is why it saves a little more.

Can my lender charge a penalty for paying my mortgage off early?

Some loans have a prepayment penalty. Federal rules allow one only on certain fixed-rate qualified mortgages, never after the third year, and capped at 2% of the prepaid balance in years one and two and 1% in year three. Your Loan Estimate shows whether your loan has one.

Will paying extra lower my monthly payment?

Not on its own. On a fixed-rate loan, your required payment usually stays the same and the loan ends sooner. If you want a lower payment after paying down a large amount, ask your servicer about a recast.

Should I pay extra on my mortgage or keep the cash?

It depends on your rate, savings and goals. Many people keep an emergency fund first, because money paid toward the loan is hard to get back without selling or borrowing. This is a personal choice, so talk with a financial professional.

Ready to take the next step?

Call 561-704-0091 to talk with a National House Search specialist, or Schedule a visit.

This is general information, not financial, tax or legal advice. Figures checked November 10, 2026.