Mortgage Payoff Calculator

The same amortisation as the fixed-payment page, run twice: once at P = A, once at P = A + E, where A is the scheduled monthly payment and E is the extra you add each month.

B

The balance you still owe today

r

Monthly interest rate: the annual rate divided by twelve

A

The scheduled monthly payment, from the standard amortisation formula

E

The extra amount you add to each payment

m

Months until the balance reaches zero, paying A + E

s

Months saved: the scheduled term minus m

Use it whenever you have spare cash each month and want to know whether pointing it at the mortgage beats keeping it. Start with the extra payment at 0 so you can see the baseline cost of doing nothing, then raise it a little at a time and watch which of the two numbers moves faster. The months fall roughly in proportion to how much extra you pay, but the interest falls faster than that, and the reason is compounding in reverse: the earlier a dollar of principal goes, the more future interest it cancels. This is also why a large one-off payment early in the loan does more than the same total spread over the last few years. Then check the reference chart below, which runs four extra-payment levels on the same default mortgage, to see the shape of the curve before you decide what you can commit to. If your lender charges an early-repayment penalty or limits overpayments, read that first — this page does not model either.

1. 320,000 at 6.5% over 360 payments, adding 300 a month

   1. Monthly rate: 6.5 ÷ 12 = 0.541667% a month, which is 0.00541667 as a decimal
   2. Scheduled payment: 320,000 at 0.541667% over 360 months = 2,022.62 a month
   3. With the extra 300 the payment becomes 2,322.62, and the balance reaches zero after 254 payments
   4. Months saved: 360 − 254 = 106, which is 8.8 years
   5. Interest paying the scheduled amount only: 408,140.64, the final payment being adjusted to clear the balance
   6. Interest paying 2,322.62: 269,695.73
   7. Interest saved: 408,140.64 − 269,695.73 = 138,444.91

   This is the page's default. Compare the saving with what the extra payments actually cost: 106 payments of 300 is 31,800, so 138,444.91 of interest is removed for 31,800 of extra cash. That ratio is the whole argument for overpaying, and it is at its strongest early in the loan.

2. The same mortgage with nothing extra

   1. Extra payment is 0, so the payment each month is the scheduled 2,022.62
   2. The balance runs the full 360 payments
   3. Months saved: 360 − 360 = 0
   4. Interest with the extra payments and interest without them are the same figure, 408,140.64

   The baseline for every other row. If this example and the one above ever agreed on months but disagreed on interest, something would be wrong with the page rather than with the mortgage: the two runs are the same arithmetic on the same loan.

3. A 36,000 balance at 0%, adding 200 a month

   1. Monthly rate is 0, so the scheduled payment is 36,000 ÷ 36 = 1,000
   2. With the extra 200 the payment becomes 1,200, and 36,000 ÷ 1,200 = 30 payments
   3. Months saved: 36 − 30 = 6, which is half a year
   4. Interest saved: nothing, because at 0% there is no interest to save

   A useful edge case: overpaying still buys time when the rate is zero, but it buys nothing else. On a loan that does charge interest the time and the money move together; here only one of them does.

The arithmetic is exact for the two scenarios it compares, and the inputs are yours; what it cannot see is the rest of your loan. The rate is held fixed for the whole remaining term, so on a variable-rate mortgage this describes neither the future nor the past — run it again at the rate you expect after a reset and treat the two answers as a range. Only the monthly payment is modelled: a lump sum, a bonus paid once a year, or a change of payment partway through are not here, and each of them changes the answer in a different direction. Nor does it know what your lender permits. Many mortgages cap overpayments or charge an early-repayment charge, and in some countries the charge is a fixed number of months' interest, which can eat a large part of the saving shown above. Nothing here is tax advice: whether the interest you are clearing was deductible, and what losing that deduction costs you, depends on where you live and on your own circumstances. The schedule is monthly and the interest compounds monthly, so a lender who charges interest daily will differ by a small amount. Finally, the amounts carry no currency symbol and no inflation adjustment — 138,444.91 is 138,444.91 in whatever currency you typed, and it is not 138,444.91 in today's money if the loan runs for another twenty years.

How much does paying a little extra each month actually save?

More than the extra money itself, and disproportionately more the earlier you start. On 320,000 at 6.5% with 360 payments left, adding 300 a month ends the loan 106 months early and removes 138,444.91 of interest, for 31,800 of extra payments. The same 300 added in the final five years would save a small fraction of that.

Should I overpay the mortgage or save the money instead?

The arithmetic in this page answers only one half of that, and it is the easier half: overpaying returns whatever your mortgage rate is, risk-free and tax-free in most places. Whether that beats what the money would earn elsewhere is a comparison this page cannot make for you, because it needs your savings rate, your tax position and how long you would leave the money invested.

Why is the interest saved larger than the extra I pay?

Because each extra amount does two things at once: it removes principal, and it removes every future month of interest that principal would have earned. A dollar of principal retired in year two stops earning interest for twenty-eight more years; the same dollar retired in year twenty-eight stops earning interest for three.

Does the calculator include an early repayment charge?

No. Many lenders cap how much you may overpay each year and charge a fee above that, and some charge a fixed number of months' interest if you clear the balance entirely. If your mortgage has one of those, subtract it from the interest saved before deciding — on a loan with several years left, that fee can take a visible bite out of the figure above.

What if my rate changes before the loan ends?

Run the page twice: once at today's rate, once at the rate you expect after the reset, and treat the two answers as the range you are choosing between. The saving is larger at a higher rate, so the pessimistic answer is also the one that makes overpaying look better. The page itself holds the rate still for the whole remaining term.

Can I use this for a car loan or a personal loan?

Yes, as long as the loan is repaid on a level monthly payment with the rate fixed — the arithmetic is identical. Enter the balance, the rate and the number of payments left. What changes is the penalty structure and the tax treatment, neither of which is modelled here, and for most car and personal loans there is no early-repayment charge to worry about.

• Publication 936 — Home Mortgage Interest Deduction: the acquisition-debt limit and how mortgage interest is treated for tax — Internal Revenue Service (United States)
• H.15 Selected Interest Rates — the monthly series that shows how far mortgage rates move, which is the risk the fixed-rate assumption on this page ignores — Board of Governors of the Federal Reserve System (United States)