Welcome to the ultimate Mortgage Extra Payment Calculator. Easily visualize how much time and interest you can save by making additional principal payments on your home loan. Enter your current loan details and see the immediate impact of your extra contributions.
Mortgage Extra Payments Impact Calculator
Estimated Payoff Impact
Mortgage Extra Payments Formula
The calculation is performed using an amortization process, but the core relationship is based on the standard fixed-rate mortgage payment formula:
Where P is the monthly payment, L is the principal, i is the monthly interest rate, and n is the number of months. The extra payment simply increases the ‘P’ value for the new amortization schedule, leading to a reduced ‘n’ (term).
Formula Sources:
Variables
The following variables are used in the calculation:
- Loan Principal: The initial amount borrowed.
- Annual Interest Rate: The nominal interest rate on the loan (as a percentage).
- Original Loan Term: The scheduled length of the loan in years (e.g., 15 or 30).
- Extra Payment Per Month: The additional principal amount you commit to paying each month.
Related Calculators
Explore other financial tools to help manage your debt:
- Loan Payoff Calculator
- Amortization Schedule Calculator
- Mortgage Refinance Break-Even Calculator
- Debt Consolidation Savings Calculator
What is a Mortgage Extra Payment?
A mortgage extra payment is any amount paid above your required monthly payment that is specifically directed toward the principal balance of the loan. This is one of the most effective ways to save money over the life of your mortgage.
Because mortgage interest is calculated daily or monthly based on the *remaining* principal balance, paying down the principal faster immediately reduces the base amount on which future interest charges are calculated. Even small, consistent extra payments can shave years off a loan term and save tens of thousands of dollars in interest.
How to Calculate Extra Payment Impact (Example)
A step-by-step example using the amortization process:
- Determine Initial Parameters: Get the Principal ($200k), Annual Rate (6.5%), and Term (30 years).
- Calculate Original Monthly Payment: Using the formula, find the required payment $M$. (E.g., $1,264.14).
- Determine New Payment: Add the Extra Payment ($100) to the original payment: $M_{new} = \$1,264.14 + \$100 = \$1,364.14$.
- Run Amortization Loop: Simulate the loan monthly. In each step, calculate interest on the remaining balance, subtract it from the payment ($M_{new}$), and apply the rest to principal.
- Track Payoff: Stop the loop when the principal reaches zero. The number of steps taken is the new term in months ($N_{new}$).
- Calculate Savings: Compare the total interest paid in the original 360-month schedule ($I_{original}$) to the total interest paid in the new $N_{new}$ schedule ($I_{new}$). The difference is the interest saved.
Frequently Asked Questions (FAQ)
Is it better to pay extra on my mortgage or invest the money?
This depends on your mortgage rate vs. expected investment return. Paying extra provides a guaranteed return equal to your interest rate (tax-free), which is often a safe bet, especially for high-interest or high-balance loans. Investing may offer a higher return but comes with risk.
Will making a single large extra payment help?
Yes, any extra payment immediately reduces the principal, lowering your interest costs going forward. However, consistent monthly payments (as modeled by this calculator) offer the most predictable long-term benefit.
How do I ensure the extra payment goes to principal?
You must clearly designate the extra amount as a “principal-only payment” on your payment coupon or online portal. If you don’t specify, the lender may hold the funds or apply them toward future escrow or interest payments.
Does this calculator account for taxes and insurance (escrow)?
No, this calculator focuses only on the P&I (Principal and Interest) portion of your loan. Escrow amounts (taxes and insurance) do not affect the interest you pay or the payoff term.