Use the Extra Payment Mortgage Calculator to quickly determine how much you can save on total interest and how quickly you can pay off your home loan by making additional principal payments. Input your loan details and your proposed extra payment strategy to see the results instantly.
Extra Payment Mortgage Calculator
Extra Payment Mortgage Calculator Formula:
While the standard loan payment formula is simple, calculating the impact of extra payments requires running an amortization schedule (a monthly simulation).
Standard Monthly Payment (M) Formula:
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1 ]
Where:
P = Principal Loan Amount
i = Monthly Interest Rate (Annual Rate / 1200)
n = Total Number of Payments (Loan Term in Years * 12)
Variables Explained:
- Loan Principal: The initial amount borrowed for the mortgage.
- Annual Interest Rate: The nominal annual percentage rate (APR) of the loan.
- Loan Term (Years): The number of years over which the loan is scheduled to be repaid (e.g., 15 or 30 years).
- Extra Payment Amount: The additional amount you plan to pay toward the principal.
- Extra Payment Frequency: How often the extra payment is applied (monthly, annually, or as a single lump sum).
Related Financial Calculators:
- Amortization Schedule Calculator
- Refinance Savings Calculator
- Bi-Weekly Mortgage Calculator
- Mortgage Affordability Tool
What is an Extra Payment Mortgage Calculator?
An extra payment mortgage calculator is a specialized tool that models the impact of paying more than the required minimum principal and interest (P&I) payment each month. This seemingly small habit can have a massive compounding effect, dramatically reducing the overall life of your loan and the total interest you pay to the lender.
The primary benefit of an extra principal payment is that the money immediately reduces the loan’s principal balance. Since mortgage interest is calculated daily or monthly based on the outstanding principal, a lower balance means less interest accrues in the following period, accelerating the amortization process. This calculator quantifies those exact savings, providing a clear financial incentive.
It is important to verify with your lender that extra payments are correctly applied to the principal balance and that your loan does not have prepayment penalties. Using this calculator can help you budget for the extra payment and understand its long-term financial payoff.
How to Calculate Extra Payment Savings (Example):
To understand the full savings, the calculation involves running two parallel amortization schedules:
- Determine the Standard Payment: Calculate the base monthly P&I payment using the official mortgage formula (M).
- Run the Base Amortization: Simulate the loan payoff month-by-month, tracking the total interest paid until the principal reaches zero.
- Include the Extra Payment: Run a second amortization schedule, adding the specified extra payment amount (e.g., $100 monthly) to the P&I payment.
- Determine New Payoff: Track the total number of payments needed in the second schedule until the principal reaches zero.
- Calculate Savings: The difference between the total interest paid in the base scenario and the total interest paid in the extra payment scenario is your Interest Saved. The difference in the number of months is the Time Saved.
Frequently Asked Questions (FAQ):
A: Even small, consistent amounts—like $50 or $100 extra per month—can save thousands of dollars and years off your loan. The best amount is whatever you can comfortably afford to pay consistently without straining your finances.
A: Yes, it matters greatly. Paying $1,200 annually versus $100 monthly will result in slightly different savings. Monthly payments reduce the principal sooner, leading to maximum interest reduction. The calculator allows you to compare these scenarios.
A: The principal is the money you originally borrowed. Interest is the fee the lender charges you for borrowing that money. Extra payments should always be directed explicitly toward the principal to accelerate payoff.
A: No. Your required minimum monthly payment remains fixed according to your loan contract. Making extra payments simply speeds up the total payoff, but you must still meet the minimum until the balance is zero.