Does paying extra on my mortgage really help?

Yes. Every extra dollar goes straight onto the principal, so you stop paying interest on it for the rest of the loan. Because mortgages run for decades, even a small regular extra payment can save tens of thousands in interest and clear the loan years early.

Is it better to pay extra each payment or a lump sum?

Both help. Regular extra payments compound their savings over the whole term, while a lump sum makes a big one-off dent. Many people do both. Check your loan allows extra payments without a break fee, which can apply on fixed rates.

Can I be charged for paying extra?

On a floating rate you can usually pay as much extra as you like for free. On a fixed rate, lenders often allow a limited amount of extra each year, and going over it can trigger a break fee. Check your loan terms before increasing payments.

Mortgage Extra Repayment Calculator

This calculator shows what paying a bit extra on your mortgage each month really does, in dollars and years. You enter your current loan balance, your interest rate, the years remaining, and the extra amount you plan to add to your monthly repayment. It works out your normal payment, then recalculates the loan with the extra included, and returns the interest saved over the life of the loan, the time saved in years and months, your new payoff length, and your new monthly payment. Because every extra dollar comes straight off the principal, it stops accruing interest for the rest of the term, so even a modest extra payment on a long mortgage can save tens of thousands of dollars and clear the loan years sooner. Use it to test different extra amounts and see how sensitive the savings are to small increases, to decide whether to direct a pay rise or bonus at the mortgage, or to compare paying extra each month against a one-off lump sum. Check your loan allows extra repayments without triggering a break fee, which can apply on fixed rates once you go over an annual limit. These figures are an indicative estimate based on a constant interest rate and repayment amount; your actual result will vary if your rate changes, you switch loans, or you adjust your extra payments over time.

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Why extra repayments work so well

A mortgage charges interest on the balance owing. Any extra you pay comes straight off the principal, so you never pay interest on that money again for the rest of the loan. Because the loan runs for decades, the saving compounds and a modest regular extra can take years off the term.

Worked example

On a $500,000 loan at 6.5% with 25 years to run, the normal payment is about $3,375 a month. Adding $200 a month clears the loan around 3 years early and saves roughly $75,000 in interest, because that extra principal stops accruing interest for the whole remaining term.

Tips

Round your payment up to the nearest hundred to make extra payments painless.
Direct pay rises and bonuses at the mortgage while you can.
On a fixed rate, check how much extra you can pay before a break fee applies.

Related calculators

Mortgage Lump Sum Impact Calculator: effect of a one-off payment.
Mortgage Offset Calculator: savings used to offset interest.
Mortgage Repayment Calculator: standard repayments.
Mortgage Calculator: full mortgage breakdown.

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