How to Calculate the Effect of Extra Principle Payments

You can reduce your principal balance and the total interest you pay over the life of a loan with extra mortgage payments.

Extra principal payments can significantly reduce the total interest paid on a mortgage. They will also reduce the time it takes to pay off the principal balance. Mortgage calculators that include an amortization function will allow you to calculate the effect of additional principal payments.

Step 1

Find an online mortgage calculator with amortization and extra payment calculations, such as the calculators from the and Mortgage-X websites. You can find links to these in the Resources section.

Step 2

Enter your current mortgage data and calculate the principal and interest payment. You need the original principal amount, the interest rate, the mortgage start or first payment date and the mortgage term in years. Most mortgages have 30-year or 360-month terms.

Step 3

Look at the amortization table for your mortgage and write down the date of the last payment and the total interest paid over the term of the mortgage. With a 6 percent mortgage, you will pay more interest than principal over the life of the loan.

Step 4

Enter additional principal payments and calculate a new amortization schedule. The mortgage calculator will allow you to set up additional payments, monthly or annual, or a one-time additional principal payment. Note the effect on the total interest paid and the payoff date for the mortgage.

Step 5

Work with the calculator to see the effects of different levels of additional principal payments to your mortgage.


The earlier you make extra principal payments, the larger effect they will have on reducing the total interest paid. Notice how much interest is paid on a mortgage in the early years compared to the later years. The last payment largely represents principal you have paid interest on for up to 30 years.


Money paid against principal on a mortgage cannot be recovered until the mortgage is paid off or the home is sold. Mortgage principal reduction is a long-term plan and the effect builds up over time. It is not a good way to build short-term savings.