Extra Mortgage Payments: Exactly What $100 a Month Does to a 30-Year Loan
An extra $100 a month on a $340,000 mortgage at 6.25% cuts 3.5 years and $58,000 of interest. Full amortization tables for $100, $200, $400 and the 13th-payment trick — plus when investing beats prepaying.
Mortgage prepayment advice usually comes in two flavors: inspirational ("pay it off early and live free!") or dismissive ("just invest the difference"). Neither shows the amortization table. So here is the table — one loan, four prepayment levels, every number computed from the actual schedule — followed by the honest case for and against doing it.
The example loan
To make every figure concrete, the baseline is a common mid-2020s purchase scenario:
- Loan amount: $340,000
- Rate: 6.25% fixed, 30-year term
- Principal and interest payment: $2,093.44/month
- Total interest over the full 30 years: $413,637.85
Read that last number again: at 6.25%, a borrower pays more in interest than the house cost. That is not an error or an exaggeration — it is what a 30-year amortization does, and it is why even small extra principal payments have outsized effects.
Why small extra payments punch above their weight
Every payment is interest on the current balance. In year one of this loan, you pay $25,121.28 — and $21,137.16 of it, about 84%, is interest. Only $3,984.12 touches the principal. After ten years you will have sent the bank roughly $251,000 and still owe $286,408 of the original $340,000.
An extra dollar paid in month one never accrues a single day of interest for the next 29 years. That dollar effectively "earns" the mortgage rate, guaranteed, compounding monthly, for the life of the loan. The earlier in the schedule the extra payment lands, the bigger the effect — an extra $100 in year one does far more than the same $100 in year twenty.
The full results: four prepayment levels
Each row is a full simulation of the loan with the extra amount added to every monthly payment:
| Extra principal | Loan paid off | Time saved | Interest saved |
|---|---|---|---|
| $0 (baseline) | 30.0 years | — | — |
| $100/mo | 26.5 years | 3.5 years | $58,304.97 |
| $200/mo | 23.7 years | 6.3 years | $100,687.20 |
| $400/mo | 19.9 years | 10.1 years | $159,147.42 |
| $174.45/mo (one extra payment per year) | 24.4 years | 5.6 years | $90,970.77 |
Three things stand out. First, $100 a month — about the cost of a couple of takeout meals — erases $58,000 of interest. Second, the returns scale sub-linearly: doubling the extra payment does not double the savings, because each additional dollar comes off a smaller remaining balance. Third, the classic "make one extra payment a year" trick (adding one-twelfth of the payment each month, here $174.45) lands nearly as well as a flat $200 extra — it is just a less efficient way to add roughly the same total.
Lump sum vs. monthly spread: timing is worth tens of thousands
Suppose you have $12,000 to put toward the loan this year. Two ways to deploy it: send the whole $12,000 as a lump sum in month twelve (say, after a bonus lands), or add $174.45 to every payment starting now — the same total by month twelve. Same money, very different result:
| Deployment of $12,000 | Loan paid off | Interest saved |
|---|---|---|
| $174.45/mo extra from month 1 | 24.4 years | $90,970.77 |
| $12,000 lump sum in month 12 | 27.3 years | $55,390.56 |
The difference is $35,578 — not because the strategy is clever, but because eleven months of balance reduction stop accruing 6.25% immediately. Every dollar of principal removed early saves interest for the rest of the loan's life; the same dollar arriving later saves less. The practical takeaway: whatever prepayment amount you choose, start it now, even if it is smaller than the number you eventually hope to afford. A future raise can increase the payment; nothing recovers the months already spent at the full balance.
Two mechanical notes before you start
Check for prepayment penalties. Most conventional US mortgages written since 2014 have none, but some loans — particularly certain adjustable-rate and non-qualified products — still carry them, often limited to the first few years. It is a one-line question to your servicer or a clause number in your note.
Prepayment is not recasting. Extra principal shortens the loan but your required monthly payment stays the same. A recast is a different product: you make a large lump sum and the lender reduces the required payment for the remaining term, usually for a few hundred dollars in fees. If your goal is lower monthly obligations, that is a refinance/recast conversation. If your goal is paying less interest and finishing years early, extra principal is the tool.
The case against: what else could the $200 do?
The honest comparison for that $200/month is not "prepay or spend it." It is "prepay at a guaranteed 6.25% or invest at a hoped-for return." Invested monthly in a broad index portfolio averaging 7% — a long-run historical figure for US stocks, not a promise — $200/month over 30 years grows to about $243,994: $72,000 of principal plus $171,994 of growth. Prepaying the same $200/month saves $100,687 in interest on this loan. On paper, investing wins by a wide margin — if the market actually averages 7% and you actually leave it alone for 30 years.
The prepayment side has properties investing does not: the 6.25% is guaranteed and effectively after-tax (interest you never owe is not taxed, while dividends and capital gains are), and a paid-off house is immune to sequence-of-returns risk. The investing side has liquidity: money in a brokerage account can be withdrawn in an emergency; equity in a house cannot, except by selling or borrowing against it.
A defensible priority order for most households:
- Emergency fund to a real level first — see how much is actually enough.
- Every debt above the mortgage rate gone, cheapest-first by interest rate — the framework in avalanche vs snowball. A 22.9% credit card dwarfs any mortgage conversation; even the rate math in balance transfer arithmetic shows why cards come first.
- Any 401(k) match captured in full — a 50% or 100% match beats a guaranteed 6.25% instantly.
- Then, with spare cash flow, split between tax-advantaged investing and mortgage prepayment by preference. Prepaying at 6.25% while a savings account pays 4% is a sound trade — you are converting a 4% asset into a 6.25% guaranteed one, as the savings return breakdown makes clear.
Running your own loan
The simulation is ten lines of arithmetic: balance × (rate ÷ 12) is this month's interest; payment minus interest is principal; subtract and repeat with the extra added to each payment until the balance hits zero. The calculators page automates it — plug in your real balance, rate, and payment, and compare the same four prepayment levels against your own amortization schedule. The numbers change with your loan; the conclusion rarely does.
