Unlock the power of compound interest savings with our mortgage calculator adding extra payments. By applying additional funds to your principal balance each month, you can drastically reduce your loan term and save thousands in interest.
Extra Payment Mortgage Calculator
mortgage calculator adding extra payments Formula
The logic behind calculating extra payments involves running a comparative amortization schedule. We calculate the interest charged each month on the reducing balance for both a standard schedule and an accelerated schedule.
Total Savings = Standard Interest – Accelerated Interest
Variables
- Principal: The portion of your standard payment that reduces the loan.
- Extra Payment: Additional cash applied 100% to principal reduction.
- Interest Savings: The future interest you avoid by paying down the balance today.
Related Calculators
- Bi-Weekly Payment Calculator
- Additional Principal Calculator
- Amortization Schedule
- Refinance Breakeven Calculator
What is a Mortgage Calculator Adding Extra Payments?
A mortgage calculator adding extra payments is a tool used to forecast the benefits of prepayment. By paying more than the minimum required by your lender, you directly lower the principal balance.
Since mortgage interest is calculated daily or monthly on the outstanding balance, a lower balance means less interest accrues in the next period. This “snowball effect” can shave years off a 30-year loan.
How to Calculate Extra Payments (Example)
- Baseline: A $200,000 loan at 6% for 30 years costs ~$1,200/month.
- Add Extra: Paying an extra $100/month makes the total payment $1,300.
- Result: The calculator shows this small addition pays off the loan roughly 5 years early and saves over $40,000 in interest.
Frequently Asked Questions (FAQ)
Generally, no. Your required monthly payment is fixed. Extra payments shorten the term (number of payments) unless you ask the lender to “recast” the loan.
Most modern conventional, FHA, and VA loans do not have prepayment penalties. However, always check your loan estimate or contact your servicer to be sure.
Ideally, include it with your regular monthly payment. Ensure you designate it as “Principal Only” so the lender applies it correctly.
It depends on the interest rate. Paying down a 7% mortgage is a guaranteed 7% return. If your investment portfolio earns 5%, paying the mortgage is smarter.