What Is a Mortgage Payoff?
Paying off a mortgage early means paying more than the required amount, so the loan ends sooner. All of an extra payment normally goes to the balance. A smaller balance is charged less interest every month after that, so more of each regular payment goes to principal too. That's why a modest extra payment can save years.
Things to weigh first
- Other uses for the money: extra payments earn you, in effect, your mortgage's interest rate, with no risk. Money saved or invested elsewhere could earn more or less than that, and investments can lose value.
- Higher-interest debt and retirement: many people first pay off costlier debts such as credit cards, and consider tax-advantaged retirement accounts.
- Cash you can reach: money paid into a home is hard to get back out in an emergency.
- Your loan's terms: some loans have a prepayment penalty, so check yours, and ask your servicer to apply the extra to principal.
Which calculator should I use?
- This calculator: to see what paying extra on a mortgage saves.
- Loan Refinance calculator: to compare your current loan with a new one, after fees.
- Mortgage calculator: to see the full monthly cost of a home, with taxes, insurance and PMI.
- Amortization calculator: to see a loan's regular schedule, payment by payment.
How to Calculate a Mortgage Payoff
First, the regular monthly payment comes from the original loan and term:
- PV: the original loan amount.
- i: the monthly interest rate as a decimal (yearly rate ÷ 12).
- n: the original number of monthly payments.
At 0% interest, the payment is simply PV ÷ n. Then, every month from now on:
Do this with and without the extra payment until each balance reaches $0, and compare the interest and the time.
Example
A $300,000 loan at 6% for 30 years, with all 30 years left and $500 extra a month:
- The regular payment is $1,798.65, so you pay $2,298.65 a month.
- The first month's interest is $300,000 × 0.005 = $1,500, so the balance falls by $798.65 instead of $298.65.
- The loan ends after 212 payments instead of 360: 12 years and 4 months sooner.
- Interest falls from $347,515.44 to $187,219.77, a saving of $160,295.67.
How to Use the Mortgage Payoff Calculator
"If I pay $500 extra each month on my $300,000 mortgage at 6%, how much sooner will I be done, and how much interest will I save?" This calculator answers that.
Let's enter the numbers for this example in each box. They are already filled in when the calculator opens, so you can follow along and then change any box to match your own loan.
- Original Loan Amount: Enter 300,000, which is what you first borrowed, not your balance today. It must be less than $1 billion.
- Interest Rate: Enter 6, which is your loan's yearly interest rate in percent. It must be from 0 to 99.99.
- Original Term: Enter 30, which is the loan's full length in years. It must be a whole number from 1 to 50.
- Remaining Term: Enter 30 in the years box and leave the months at 0, which is how long is left on your loan today. It follows the original term until you change it, and it can't be longer.
- Extra Monthly Payment: Enter 500, which is what you'd add to each payment. Enter 0 to see the loan with no extra.
Calculate and Reset
Click Calculate to see your results. If a box has a problem, such as a remaining term longer than the original, a message pops up under that box instead. With the default numbers you get:
- Your Results: a short summary in words: your balance, and how much time and interest the extra saves.
- Interest Saved: the headline number, $160,295.67.
- Time Saved, Balance Now, New Payment and New Payoff Date: 12 years and 4 months, $300,000.00, $2,298.65, and a date counted from this month.
- Current loan and with extra: the two side by side. A link opens the Amortization calculator with the rest of your loan filled in.
- Balance chart: your balance falling with and without the extra payment.
- What a different extra would save: the interest saved at other amounts, beside yours.
- Payment schedule: every payment from now on, for either plan. Download Excel saves both with the formulas, so you can change the extra payment and see them update.
- Share Results: a link that opens this calculator with your numbers filled in. Copy it, or share it on Facebook or X.
Amounts of $1 million or more are shortened, for example $1.25M. Click Reset to put every box back to its default and show the default results again.