Calculate How Much Money Saved by Paying Extra on Mortage
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Reviewed by Calculator Editorial Team
Paying extra on your mortgage can significantly reduce your loan balance and save you money over time. This calculator helps you determine exactly how much you'll save by making additional payments, showing you the impact of your extra contributions on your loan term and interest costs.
How Extra Mortgage Payments Work
When you make additional payments on your mortgage, you're essentially paying down the principal balance faster. This has several benefits:
- Reduces the total interest paid over the life of the loan
- Shortens the loan term, saving you money on interest
- Builds equity in your home faster
- Lowers your monthly payments if you refinance later
Extra mortgage payments are typically applied to the principal first, reducing the balance owed. This means more of your payment goes toward reducing the loan amount rather than just covering interest.
How Extra Payments Affect Your Loan
The impact of extra payments depends on several factors:
- The amount of the extra payment
- When you make the extra payment (beginning or end of the loan term)
- The interest rate on your mortgage
- The remaining loan term
Making extra payments at the beginning of your loan term has a more significant impact on reducing the total interest paid and shortening the loan term compared to making the same amount at the end.
Using the Calculator
Our calculator makes it easy to estimate how much you'll save by making extra mortgage payments. Simply enter your loan details and see the results instantly.
What You Need to Know
- Current loan balance
- Current interest rate
- Remaining loan term in months
- Amount of extra payment you can make
- When you'll make the extra payment (beginning or end of term)
The calculator shows you:
- Total interest saved
- New loan term with extra payments
- Comparison of payment schedules
This calculator assumes you'll make the same extra payment every month. For irregular extra payments, the results may vary.
The Formula Explained
The calculator uses the following formula to determine the savings from extra mortgage payments:
Where:
- Original Term = Original Loan Term in months
- New Term = New Loan Term with extra payments in months
- Remaining Balance = Loan Balance after making extra payments
The calculator also accounts for the timing of extra payments, as payments made earlier in the loan term have a more significant impact on reducing total interest.
Worked Examples
Example 1: $300 Extra Payment at Beginning
Loan Balance: $200,000
Interest Rate: 4%
Original Term: 30 years (360 months)
Extra Payment: $300/month at beginning
| Metric | Original Loan | With Extra Payment |
|---|---|---|
| Total Interest Paid | $106,666.67 | $76,666.67 |
| Total Payments | $306,666.67 | $276,666.67 |
| Loan Term | 30 years | 25 years |
| Interest Saved | $30,000 |
Example 2: $500 Extra Payment at End
Loan Balance: $250,000
Interest Rate: 3.5%
Original Term: 25 years (300 months)
Extra Payment: $500/month at end
| Metric | Original Loan | With Extra Payment |
|---|---|---|
| Total Interest Paid | $68,750 | $53,750 |
| Total Payments | $318,750 | $303,750 |
| Loan Term | 25 years | 23 years |
| Interest Saved | $15,000 |
Frequently Asked Questions
- How much can I save by paying extra on my mortgage?
- The amount you save depends on your loan balance, interest rate, remaining term, and how much extra you can pay. Our calculator provides an estimate based on these factors.
- Is it better to make extra payments at the beginning or end of my loan term?
- Making extra payments at the beginning of your loan term has a more significant impact on reducing total interest and shortening the loan term compared to making the same amount at the end.
- Will extra mortgage payments affect my credit score?
- Making extra payments on time can actually improve your credit score by demonstrating responsible financial behavior and reducing your credit utilization ratio.
- Can I make extra payments if I have an adjustable-rate mortgage?
- Yes, you can make extra payments on an adjustable-rate mortgage, but you should check with your lender first to understand how it might affect your future rate adjustments.
- How often should I make extra mortgage payments?
- Making extra payments every month provides the most significant savings. If you can't make monthly payments, consider making larger payments quarterly or annually.