Mortgage Payoff Calculator

“Paying off your mortgage” means two different calculations, and confusing them costs people money. One is the payoff amount — the single figure that closes the loan on a given day, which is never the balance printed on your statement. The other is the early payoff question — how much sooner you finish, and how much interest you avoid, if you pay more than the lender asks. The calculator above answers both.

How to calculate your mortgage payoff amount

Your remaining balance is what you owed the moment your last payment posted. Interest has been accruing every day since. The payoff amount is therefore:

The worked example above uses the same $250,000 loan at 6.66%. Five years in, the balance is $234,454, and every day that passes adds $43 of interest. Quote it out 10 days and you owe $234,881 — about $428 more than the statement balance.

Three details decide whether your own number matches the lender's:

• The day count. Most US mortgages accrue on a 365-day year, but some servicers use 360. On a large balance the difference is real, so use the convention in your note.
• The good-through date. A payoff quote is valid to a specific day, usually 10 to 30 out. Send the money after that date and the shortfall keeps the loan open — often generating another month of interest over a few dollars.
• Fees and escrow. Recording and release fees are added to the quote. Your escrow balance is not subtracted from it; the servicer refunds that separately, normally within 20 business days of the loan closing.

When the money is actually moving, ask your servicer for a written payoff statement rather than relying on your own arithmetic. The figure above is for planning; only the lender's quote is binding.

What extra payments actually save

Money applied to principal removes every future interest charge that principal would have generated. That is why the effect is largest in the early years, when almost all of a scheduled payment is interest.

On the $250,000 loan above at 6.66% over 30 years, the scheduled payment is $1,607 and total interest comes to $328,364. Adding $500 to 6 payments a year cuts the interest to $205,804 and the term to 20 years 5 months — $122,560 saved and 9 years 7 months off the clock.

Two structural notes. Prepayment savings scale with your rate, so the same extra dollar is worth far more at 7% than at 3% — which is also why paying down a low-rate mortgage is often the weaker use of cash. And the saving comes from reaching a lower balance sooner, so the earlier in the term you start, the larger it is.

Where the extra payment comes from

Most people are paid every two weeks, which is 26 paychecks a year. Committing half a mortgage payment from each one funds 13 monthly payments instead of 12 — a full extra payment a year without a separate line in the budget.

Many servicers will set up biweekly drafting for you, and some charge for it. Before enrolling, confirm how they handle the money: a servicer that holds each half payment and applies it once a month gives you the extra annual payment but none of the interim interest saving, and one that holds funds until a full payment accumulates gives you nothing at all. Sending one manual extra payment a year, marked for principal, achieves the same result for free.

Before you send extra money

• Mark it “apply to principal”. Unlabelled extra funds are commonly applied to next month's payment instead, which advances your due date without reducing the balance — no interest is saved.
• Check for a prepayment penalty. Rare on modern conforming loans and limited by federal rules on qualified mortgages, but still present on some older and non-QM loans. It is in your note.
• Extra payments do not lower your monthly payment. The schedule is fixed; you finish earlier instead. If a lower payment is the goal, ask your servicer about recasting, or see the refinance calculator.
• Weigh it against the alternatives. Paying down a mortgage is a guaranteed return equal to your rate. That beats a savings account and loses to an employer match or high-rate consumer debt.