Extra Money on Mortgage Calculator
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Reviewed by Calculator Editorial Team
Use this calculator to determine how much extra money you can put toward your mortgage payments and see the impact on your loan term and interest savings. Whether you're looking to pay off your mortgage faster or simply reduce your monthly payments, this tool provides clear insights into the benefits of additional mortgage payments.
How to Use This Calculator
To use the Extra Money on Mortgage Calculator, follow these simple steps:
- Enter your current mortgage balance in the "Current Mortgage Balance" field.
- Input your current monthly payment in the "Current Monthly Payment" field.
- Specify the interest rate on your mortgage in the "Interest Rate" field.
- Enter the number of years remaining on your mortgage in the "Years Remaining" field.
- Enter the additional amount you can put toward your mortgage in the "Extra Money per Month" field.
- Click the "Calculate" button to see the results.
The calculator will display the new monthly payment, the reduced loan term, and the total interest savings from making extra mortgage payments.
How Extra Money on Mortgage Works
When you make extra payments toward your mortgage, you reduce the principal balance faster, which lowers the total interest paid over the life of the loan. This can lead to significant savings and a shorter loan term.
Extra mortgage payments work by:
- Reducing the principal balance more quickly, which decreases the amount of interest charged.
- Shortening the loan term, which means you'll pay off the mortgage earlier.
- Lowering your monthly payments, which can free up cash flow for other expenses.
Making extra payments is a strategic way to save money and pay off your mortgage faster, but it's important to consider your financial situation and goals before making additional payments.
The Formula Explained
The Extra Money on Mortgage Calculator uses the following formula to calculate the impact of extra payments:
New Monthly Payment = Current Monthly Payment + Extra Money per Month
Reduced Loan Term = Original Loan Term - (Extra Money per Month / New Monthly Payment) * Original Loan Term
Total Interest Savings = Original Total Interest - New Total Interest
Where:
- Current Monthly Payment is your current mortgage payment.
- Extra Money per Month is the additional amount you can put toward your mortgage.
- Original Loan Term is the remaining term of your mortgage in years.
- Original Total Interest is the total interest you would pay over the original loan term.
- New Total Interest is the total interest you would pay with the extra payments.
Worked Example
Let's say you have a mortgage with the following details:
- Current mortgage balance: $200,000
- Current monthly payment: $1,200
- Interest rate: 4.5%
- Years remaining: 15
- Extra money per month: $200
Using the calculator, you would find:
- New monthly payment: $1,400
- Reduced loan term: 12 years and 6 months
- Total interest savings: $12,000
This example shows how making extra payments can significantly reduce your loan term and save you money on interest.
Frequently Asked Questions
- How much extra money can I put toward my mortgage?
- You can put as much extra money as you can afford without affecting your other financial obligations. The calculator will show you the impact of different amounts.
- Will making extra payments hurt my credit score?
- Making extra payments can actually improve your credit score by reducing your credit utilization ratio and showing lenders that you're managing your debt responsibly.
- Can I make extra payments if I have a variable-rate mortgage?
- Yes, you can make extra payments on a variable-rate mortgage, but you should be aware that the interest rate may change, which could affect the overall cost of your loan.
- What happens if I stop making extra payments?
- If you stop making extra payments, your loan term will return to its original length, and you will resume making your original monthly payments.
- Is it better to make extra payments or refinance my mortgage?
- The best option depends on your financial situation and goals. Making extra payments can be a cost-effective way to pay off your mortgage faster, while refinancing may offer lower interest rates or better terms.