Extra Payment Formula Explained
The math behind the Extra Payment Calculator: the equation, the variables, and the assumptions it makes.
By Onias Derilus, Mortgage Capital · NMLS# 1859012 · Last Updated: June 2026
It shows how making extra principal payments — monthly, yearly, or one-time — shortens your loan term and cuts the total interest you pay.
The Formula
Each extra dollar reduces the balance, so future interest = lower balance × rate
Extra payments work because mortgage interest is charged on the outstanding balance. Every dollar of extra principal permanently removes the future interest that dollar would have generated for the rest of the loan.
The effect compounds over time, so extra payments made early in the loan save far more than the same amount paid near the end. The calculator quantifies both the time saved and the dollars saved.
Turn Your Extra Payment Estimate Into a Real Pre-Approval
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Rates are illustrative only. APR and payments vary by credit score, loan amount, and market conditions. Subject to credit approval. Not a commitment to lend. NMLS# 1859012. Equal Housing Lender.