An extra $200 a month sounds like it should shave a couple years off your loan. It usually does more than that, but only if it actually goes where you think it does.
Every payment splits into interest and principal
Each scheduled mortgage payment is split into two parts: interest owed on your current balance, and principal that actually reduces what you owe. Early in the loan, interest dominates the split, because your balance is still high. As the balance falls, more of each payment goes to principal, an effect called amortization.
Why an extra dollar today is worth more than one later
Because interest is calculated on your outstanding balance every month, reducing that balance earlier means every future month accrues interest on a smaller number. An extra $5,000 paid in year 2 of a 30-year loan eliminates roughly 28 years of interest on that $5,000; the same $5,000 paid in year 25 only eliminates about 5 years of interest on it. Timing matters as much as amount.
Extra principal payments do two things at once: they shorten your loan's remaining term (fewer total payments), and, on a conventional loan with PMI, they can move your 80% by-request PMI cancellation date earlier, since it's based on your actual balance, not your original schedule.
The mistake that erases the benefit
Sending extra money without designating it doesn't guarantee it reduces principal. Some servicers apply an unlabeled extra amount to your next month's payment instead, which pays you ahead in time but does nothing to your amortization schedule or your PMI timeline. Always explicitly mark extra payments as "additional principal", through your servicer's portal, a memo line, or a phone confirmation, and check your next statement to confirm the balance dropped by the full extra amount.
"An extra $5,000 in year 2 saves roughly 28 years of interest on it. The same $5,000 in year 25 only saves about 5."
Recurring vs. one-time extras
- Recurring extra payments (e.g., an extra $150 every month) compound the effect month over month, and are the most reliable way to meaningfully shorten a 30-year loan.
- One-time lump sums (a bonus, a tax refund) still help, and are best applied as early in the loan as you can, since the interest-savings clock starts running the moment the balance drops.
Our free extra payment calculator runs this on your own balance: enter what you'd pay extra and it rebuilds the full amortization schedule to show the interest saved and the years cut off. If PMI is part of what's motivating you, add your original home value and it prices the earlier 80% cancellation too, or use the dedicated PMI drop-date calculator.
Tracking exactly how much interest and time each extra payment actually saves takes a full amortization model, not a rule of thumb. CasaCrow recalculates your real schedule every time you log a payment.
See exactly what an extra payment saves you
Run the numbers on your own balance in seconds, no signup. CasaCrow then recalculates your interest, payoff date, and PMI timeline every time you log a payment.
Try the free calculator