Lump Sum vs Extra Monthly Payment
Which saves more — paying a lump sum now or adding extra to each monthly payment?
How to use this calculator
Enter your loan details and both strategies you want to compare. Strategy A applies a one-time lump sum today. Strategy B adds a fixed amount to your payment every month. The calculator shows which saves more total interest and cuts more time off your loan.
Does lump sum always win?
Usually yes, because a large amount applied immediately reduces the balance on which future interest accrues. But if the extra monthly amount is large enough, it can eventually surpass the lump sum's savings — especially on longer time horizons. The best answer depends on your specific numbers.
What if I can do both?
Even better. Apply the lump sum now to get an immediate principal reduction, then continue making extra monthly payments. You can model that in this calculator by entering both fields simultaneously.
Should I recast after a lump sum payment?
If you want a lower monthly payment rather than a shorter loan term, recasting makes sense after a large lump sum. Use the Mortgage Recast Calculator to see what your new payment would be.
How large does the lump sum need to be to beat monthly extra payments?
It depends on the monthly amount and your time horizon. A $10,000 lump sum applied today immediately reduces the balance that interest is computed on for every remaining payment — typically beating a $100/month extra payment within 2–3 years. The larger the lump sum relative to the monthly amount, the faster it wins. Enter your actual numbers to see the crossover on your specific loan.
What is the opportunity cost of a lump sum payment?
Applying cash to your mortgage is essentially a risk-free investment at your mortgage rate. If you have a 7% mortgage, you earn a guaranteed 7% return on every dollar applied to principal. Weigh that against what the money could earn invested in the market (higher expected return, but with risk and no guarantee) or sitting in a high-yield savings account (currently 4–5%, more liquid).
Should I pay off my mortgage early or keep the money liquid?
Liquidity matters. Home equity is not easily accessible in an emergency without a home equity loan or line of credit. Many advisors recommend keeping 3–6 months of expenses in accessible savings before accelerating mortgage payoff. After that, extra payments become a reasonable next step — especially if you're paying a high interest rate or want the psychological comfort of a paid-off home.