If you look at an amortization table, you get a practical answer for prepaying mortgages. To put it slightly over-simply, in the first month you pay $950 in interest, while in the 360th month you pay $50. If you prepay an extra $1000 in the first month, you shorten the loan by about 1.5 years. If you pay an extra $1000 in the 358th month you shorten it by about a month. Paid in the first month the extra $1000 saves about $15 - 16K in interest.

You're right; I was wrong. I rechecked and it is more like 2.5 - 4 months shortening for an early prepayment, depending on interest rate.

Please correct me if I'm wrong, but I think that you're paying off just over 1 month's worth of mortgage payment no matter when you make that $1000 payment. If it is $1000/mo and the last month is $950 principal and $50 interest, and you pay $1000 into your mortgage at any time, the banks apply that amount to the total principal owed, but do not re-amortize or recast the note unless requested/paid to.

In other words, hasn't your $1000 bucks paid off just the last month's payment, and then $50 of the second to last month's principal payment? You do not have the interest amount reset as 3.5% of the new principal resulting from your additional payment, do you? That would cause the entire amortization schedule, final payment, and interest calculations in whatever Note recorded against your property to be perpetually recalculated, which seems too favorable to the customer and not the bank. Isn't this known return one of the reasons mortgages were able to be bundled and sold by banks a la The Big Short as well?

If my understanding is right, and you did just one payment like this, you'd save about $55 in interest (going by your $50 interest from $1000).

If you instead put $1000 in a fund for 30 years, less one month, at 4% interest to account for inflation (plus 1% for good measure), you have $3,313. But in the future, your tax rate is 50% because, why not, we're making a point here. Take out your initial principal, tax the profit at half, and you end up with $1,156.75. Plus the original $1000.

Options:

You can pay the principal down and save $550.

You can invest it and, at the same time that the paydown would be realized (the last month of year 30), you can sell the investment and come out with $1,156.75 + the $50 in interest from not paying the last month. $1,256.75 > $55. In a very conservative return/tax scenario.

I am open to being wrong if you have something tangible, that would be great to convince me.

I am talking about a standard US Fixed rate 30 year mortgage if that affects any evaluations.