Interest Savings Calculator
Calculate how much interest you can save by making extra payments, refinancing to a lower rate, or paying off debt faster.
Current Debt Details
New Scenario
Interest Savings
Scenario Comparison
What If You Paid More?
| Extra Payment | Payoff Time | Interest Saved |
|---|
Ways to Save on Interest
- Make extra payments: Even small amounts reduce principal faster
- Refinance to lower rate: Shop for better rates on loans and mortgages
- Pay biweekly: 26 half-payments = 13 full payments per year
- Use windfalls: Apply tax refunds, bonuses to principal
- Round up payments: Pay $300 instead of $275
The Power of Extra Payments
On a $200,000 mortgage at 6% for 30 years:
- Regular payment: $1,199/month
- Total interest: $231,676
- With extra $100/month: Save $48,000 in interest, pay off 5 years early!
Frequently Asked Questions
Compare the interest rate on your debt to expected investment returns. Paying off high-interest debt (credit cards, personal loans) is usually better than investing. For low-rate debt (mortgages, student loans), investing may yield higher returns.
It depends on your loan balance and closing costs. Generally, a 1% rate reduction is worth pursuing on larger loans (mortgages) or if you plan to keep the loan for several years. Calculate your break-even point to decide.
Mathematically, paying as early as possible saves the most interest. If you have a lump sum, apply it now. If not, consistent extra payments still make a significant impact.
About the Interest Savings Calculator
Lifetime interest on debt — particularly mortgages and student loans — often exceeds the principal. Extra payments, even small ones, can save tens of thousands. This page covers the math and the trade-offs between extra debt payments and investing.
The Formula
Interest saved by extra payment = Original total interest − Total interest with extra payments. Each extra dollar of principal payment saves you the loan rate (compounded) on that dollar over the remaining loan term.
Worked Example
$300,000 mortgage at 6.75% for 30 years: $1,946 monthly, $400,663 total interest. Adding $200/month extra principal: payoff in 22.5 years, total interest $258,000 — saves $142,663 over the life of the loan.
Extra payments early vs late
The earlier you pay extra, the more you save (because more compounding remains). A $100/month extra for the first 10 years saves more than $100/month for the last 10. Front-load if you can.
Extra payments vs investing
Extra mortgage payments earn the mortgage rate (often 6-7%) risk-free. Stocks average 7% long-term but volatile. At low mortgage rates (<5%), investing usually wins long-term. At higher rates, payoff is more attractive.
Lump sum vs monthly extra
A one-time $10,000 principal payment in year 1 of a 30-year mortgage saves more interest than the same $10,000 spread over 10 years. But monthly contributions are easier to commit to.
Common Mistakes
- Sending extra payment without marking 'principal only'. Some lenders apply it as next month's payment.
- Paying extra on low-rate debt when high-rate debt remains.
- Skipping retirement match to pay extra on a mortgage — losing free 50-100% match returns.
Frequently Asked Questions
Does extra principal lower my monthly payment?
On a standard mortgage, no — same monthly payment, just shorter total term. Request a 'recast' after a lump-sum payment to lower the payment.
Are there prepayment penalties?
On conventional US mortgages post-2014, generally no. Always check your loan documents.
This calculator is for informational purposes only and does not constitute financial, tax, or legal advice. Consult a licensed professional before making significant financial decisions.