Why overpayments work so well
On a 30-year loan at 6.75%, roughly two-thirds of your first year's payments go to interest, not principal. Each extra dollar you send skips ahead in the schedule and eliminates every future interest charge that would have accrued on it.
A $200 monthly overpayment on a $500,000 loan at 6.75% typically saves $150,000+ in interest and pays the mortgage off 6+ years earlier. A single $10,000 lump-sum in year 2 can save $30,000+ over the full term.
Strategies compared
- Extra monthly — steady, biggest total savings over the term.
- Biweekly payments — 26 half-payments = 13 full payments per year, an "invisible" extra payment.
- Annual lump sum — great for bonuses or tax refunds.
- One-time recast — a large early lump reduces your required monthly payment while keeping the term.
When NOT to overpay
If your mortgage rate is below your expected investment return after tax, and you have room in tax-advantaged accounts, investing the difference often wins mathematically. Overpay when: the rate is high, you value guaranteed savings, or you want to eliminate PMI faster by hitting 80% LTV.