What an extra payment actually does
Every euro you pay on top of your normal mortgage instalment goes straight to the principal — the balance you still owe. Interest is charged on that balance every month, so cutting it early removes all the future interest that euro would have generated. The effect compounds: a smaller balance means less interest next month, so more of your normal payment attacks principal too.
How to calculate the impact
There is no single formula, because each extra payment changes every month that follows. The reliable method is to build two amortisation schedules and compare them:
- Baseline. Start with your balance. Each month, interest = balance × (annual rate ÷ 12). The rest of your payment reduces the balance. Repeat until it hits zero — that is your normal payoff date and total interest.
- With extra. Same loop, but add your extra payment to the principal reduction in the months you actually make it.
- The saving is the difference between the two schedules, in total interest and in number of months.
A worked example
Take a €250,000 mortgage at 3.5% with a €1,400 monthly payment. Left alone, it runs 253 months (about 21 years) and costs €103,654 in interest.
Add just €3,000 a year — €250 a month, or one refund-sized lump each year — and the same loan is gone in 203 months. You clear it about 4 years and 2 months early and save €22,134 in interest. The extra payments total €37,500 over those years; the €22,134 is the interest those payments switched off.
When you pay matters
- Monthly extra payments save the most — the balance drops sooner every single month.
- Yearly lump sums (a bonus, a tax refund) capture most of the benefit with less commitment.
- One-off payments help in proportion to how early you make them: €10,000 in year one beats €10,000 in year ten.
Watch for early-repayment limits: many EU fixed-rate mortgages cap penalty-free overpayment, often around 5–10% of the balance per year.
Check your own numbers
Plug your balance, rate, payment and overpayment into the extra mortgage payment calculator to see your exact payoff date and interest saved.