Mortgage Payoff Calculator

Should You Pay Off Your Mortgage Early?

Paying off a mortgage early saves massive amounts of interest—often $50,000-150,000 depending on the loan. But it's not always the right move. Here's when to pay it off early and when to invest instead.

The Math: How Extra Payments Save Interest

On a $400,000 mortgage at 6.5% for 30 years, your monthly payment is $2,528. Over 30 years, you pay $410,000 in interest alone—more than the original loan amount.

Add $200/month extra:

• Pay off in 24.8 years instead of 30
• Save $83,240 in interest
• Total interest paid: $326,760 instead of $410,000

Add $500/month extra:

• Pay off in 19.7 years instead of 30
• Save $166,000 in interest
• Own your home 10 years earlier

The earlier you make extra payments, the more you save. Interest is front-loaded—most of your early payments go to interest, not principal. Extra payments attack the principal directly, reducing future interest immediately.

Early Payoff Strategies

1. Extra Monthly Payment

Add $100-500/month to your mortgage payment, marked "apply to principal." This is the easiest method—set it and forget it.

• $100/month extra: Pay off 3-4 years early, save $30-40K in interest
• $300/month extra: Pay off 7-8 years early, save $100K+ in interest
• $500/month extra: Pay off 10+ years early, save $150K+ in interest

2. Biweekly Payments

Pay half your mortgage every 2 weeks instead of monthly. Result: 26 half-payments = 13 full payments per year (vs. 12 normally). You make one extra payment annually without feeling it.

• Pays off mortgage 4-5 years early
• Saves $50-70K in interest on a $400K loan
• Easiest method if your lender allows it

3. Lump Sum Payments

Use bonuses, tax refunds, or windfalls to make one-time extra payments. A $10,000 lump sum in year 1 can shave 2-3 years off your mortgage and save $30-50K in interest.

4. Recast Instead of Refinance

Make a large lump sum payment ($10K+), then ask your lender to "recast" the loan—they recalculate your monthly payment based on the new lower balance. Your payment drops, but the term stays the same. Costs $200-500 vs. $3,000-5,000 to refinance.

When to Pay Off Your Mortgage Early

✅ Your mortgage rate is above 5-6%

Paying off a 6.5% mortgage is a guaranteed 6.5% return—better than most bond yields and comparable to stock market averages. If your rate is high, prioritize payoff.

✅ You're within 10 years of retirement

Owning your home outright in retirement is massive. No mortgage payment = lower expenses = less money needed to retire. Many retirees prioritize mortgage payoff for peace of mind.

✅ You hate debt and it stresses you out

The math might say "invest instead," but if debt keeps you up at night, pay it off. Peace of mind is worth something.

✅ You've already maxed tax-advantaged accounts

If you're maxing your 401k ($23,000/year) and Roth IRA ($7,000/year), and you have extra cash, paying off the mortgage is a solid move.

When to Invest Instead of Paying Off Your Mortgage

❌ Your mortgage rate is below 4%

If you locked in a 2.5-3.5% rate during COVID, don't pay it off early. Invest the extra cash at 8-10% returns (S&P 500) and you come out ahead. A 3% mortgage is basically free money.

❌ You're not maxing your 401k/IRA

Max tax-advantaged accounts first. A 401k with employer match is an instant 50-100% return. An IRA gives you tax-deferred growth. These beat mortgage payoff every time.

❌ You're young (under 40)

Time is your greatest asset. Investing $500/month from age 30-65 at 10% returns = $1.9 million. Paying off your mortgage early saves $100K but sacrifices the $1.9M. Invest instead.

❌ You have high-interest debt

Pay off credit cards (15-25% interest) and car loans (6-10%) before the mortgage. Attack highest-interest debt first.

The Hybrid Approach (Best Strategy)

Do both—split extra cash between investing and mortgage payoff:

• Step 1: Max 401k match (instant 50-100% return)
• Step 2: Pay off high-interest debt (credit cards, car loans)
• Step 3: Split 50/50 between mortgage and index funds

Example: You have $1,000/month extra. Allocate:

• $500/month to mortgage (pay off 10 years early)
• $500/month to index funds (build $600K in 30 years)

Result: You pay off your mortgage in 20 years AND have $600K invested. Best of both worlds.

Real Example: $400K Mortgage at 6.5%

Standard 30-year mortgage:

• Monthly payment: $2,528
• Total paid: $810,000
• Total interest: $410,000
• Payoff: Year 30

Add $300/month extra:

• Monthly payment: $2,828
• Total paid: $726,000
• Total interest: $326,000
• Payoff: Year 22
• Savings: $84,000 in interest, 8 years earlier

Add $500/month extra:

• Monthly payment: $3,028
• Total paid: $690,000
• Total interest: $290,000
• Payoff: Year 19.7
• Savings: $120,000 in interest, 10+ years earlier

Common Mortgage Payoff Mistakes

• Not specifying "apply to principal": If you don't tell your lender, extra payments might go to future interest. Always specify.
• Paying off a low-rate mortgage while ignoring high-rate debt: Pay off 20% credit cards before a 3% mortgage.
• Sacrificing retirement savings to pay off the mortgage: You can't borrow for retirement. Max 401k first.
• Paying off the mortgage instead of building an emergency fund: Have 6 months expenses saved before aggressively paying off the mortgage.
• Ignoring prepayment penalties: Some mortgages charge fees for early payoff. Check your loan terms.