This calculator has been verified for accuracy based on standard compound interest and amortization principles.
Effortlessly calculate your monthly mortgage payment, see the full amortization schedule, and discover how fast you can pay off your loan by making extra principal payments.
Mortgage Calculator with Amortization and Extra Payments
Calculation Results
Mortgage Monthly Payment Formula
M = P [ i(1 + i)^n / ((1 + i)^n – 1) ]
Where:
M = Total monthly payment
P = Principal loan amount
i = Monthly interest rate (Annual Rate / 1200)
n = Number of payments (Term in Years * 12)
Variables Explained
- Loan Amount: The initial principal balance you are borrowing.
- 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 paid off (e.g., 15, 30).
- Extra Monthly Principal Payment: The fixed, additional amount you pay each month specifically to reduce the principal balance, accelerating the loan payoff.
Related Calculators
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- Loan Amortization Schedule Generator
- Simple Interest Rate Calculator
- Debt-to-Income Ratio Estimator
What is Mortgage Amortization with Extra Payments?
Mortgage amortization is the process of paying off a loan with a fixed repayment schedule in regular installments over a set period. Each scheduled payment consists of both principal and interest. Early in the loan term, most of the payment goes toward interest, but as the principal balance decreases, a larger portion goes toward principal.
Adding extra principal payments accelerates this process significantly. Because the interest for the next period is always calculated on the current principal balance, any extra money you pay reduces the balance faster. This means less interest accrues in subsequent months, leading to a much shorter loan term and substantial savings in total interest over the life of the loan.
How to Calculate Accelerated Mortgage Payoff (Example)
- Determine the Standard Monthly Payment: Use the amortization formula (M) based on your original principal, rate, and term (e.g., $300,000 at 6.5% for 30 years = $1,896.20).
- Apply the Extra Payment: Add your fixed extra principal amount (e.g., $100) to the standard principal portion of your first payment. The total monthly payment becomes $1,996.20.
- Calculate New Balance: Subtract the total principal paid (standard principal + extra principal) from the existing principal balance.
- Repeat the Process: For the next month, calculate the new interest amount based on the *new, lower* principal balance. This is the key to savings—the interest portion keeps shrinking faster than scheduled.
- Track Payoff: Continue this month-by-month process until the principal balance reaches zero. The total number of months in the loop will be your new, shorter loan term.
Frequently Asked Questions (FAQ)
The savings depend heavily on the loan size and interest rate. For a typical 30-year, $300,000 loan at 6.5%, an extra $100 per month could save tens of thousands in interest and shave several years off the loan term. Use the calculator to see your exact figures!
Yes, but you must specify it. When sending your extra money, ensure you label it explicitly as a “Principal Reduction Payment” so the lender does not mistakenly apply it toward the next month’s standard payment.
This is a personal finance decision. Paying extra principal guarantees a risk-free return equal to your mortgage interest rate. Investing carries higher potential returns but also risk. It often comes down to your risk tolerance and the difference between your mortgage rate and expected investment return.
No, making extra principal payments will not negatively affect your credit score. It shows responsible management of debt, and paying off the loan earlier is generally a positive financial move.