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Mortgage Payment Formula:
Where:
P = Principal loan amount
r = Monthly interest rate (annual rate ÷ 12)
n = Number of payments (loan term in years × 12)
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This calculator helps you understand how making additional payments toward your mortgage principal can affect your monthly payment and overall loan. It shows the difference between your regular payment and what you would pay with an extra amount added.
The calculator uses the standard mortgage payment formula:
Where:
Explanation: The formula calculates the fixed monthly payment required to fully amortize the loan over its term. The additional payment is simply added to this calculated amount.
Details: Making additional payments reduces your principal faster, which can save you thousands in interest and shorten your loan term. Even small additional amounts can have a significant impact over time.
Tips: Enter your loan amount, interest rate, and term. Then add any additional amount you plan to pay each month. The calculator will show your regular payment and the new payment with the additional amount included.
Q1: How much can I save with additional payments?
A: Savings depend on your loan details, but even $100 extra per month on a $300,000 loan at 4% can save ~$28,000 and cut 5 years off a 30-year term.
Q2: Should I refinance or make additional payments?
A: If your rate is higher than current rates, refinancing might be better. Otherwise, additional payments are a simple way to save on interest.
Q3: Are there penalties for additional payments?
A: Most US loans allow prepayment, but check your terms. Some loans have prepayment penalties, especially in early years.
Q4: Is it better to make one annual payment or monthly additions?
A: Monthly additions save more because interest is calculated monthly, but annual lump sums are still beneficial.
Q5: Should I pay off mortgage or invest extra money?
A: This depends on your mortgage rate vs. expected investment returns. Generally, if your rate is higher than 4-5%, paying down mortgage may be better.