Extra Payment Calculator
This calculator will calculate the breakdown of principal and interest payments for each year that you will be paying for the life of the loan. You can also view the monthly breakdowns.
Pre-Paying Your Mortgage: Drawbacks and benefits
House payments can consume a large portion of your paycheck, and paying a lot more toward your mortgage each month may feel like an overwhelming idea. What you may not realize, however, is that paying a little more can save you thousands of dollars over the life of the loan.
Before you put all of your extra money toward your house, use the extra payment calculator to see the benefit and consider the following to make certain it is best for your financial situation:.
Prepaying on your mortgage can save you tens of thousands of dollars. You will pay $264,240 in interest if you have a loan of $100,000 at 8 % interest for 30 years. That same mortgage held for 15 years produces only $172,080 in interest, saving you a whopping $92,160.
· It depletes the liquidity of your finances, and you won’t have that money immediately available.
· It is best to have a safety net with savings for a minimum of 6 months before putting a lot of extra money into a mortgage.
· Paying less interest on your mortgage can affect your tax picture (although paying higher interest is not a valid reason to keep a mortgage).
If you are in high interest consumer debt, it does not make financial sense to pay extra on your mortgage. Instead…Pay off other high-interest debts.
· The lower the APR, the less you save. You may be able to invest your money elsewhere with a higher return.
Consider paying the next month’s principal amount with the current house payment if you are serious about prepaying your mortgage. Early on in the loan, the majority of your monthly house payment goes toward interest, often leaving as little as $40 to $60 going toward your principal balance.
Use our Extra Payment Calculator. Look ahead and make an additional payment to include February’s principal amount when you are making your January house payment. Because the loan balance after that payment would correspond to the loan balance shown at the end of February, this essentially eliminates one full payment from the loan schedule.
Let’s say your monthly payment on a 30-year $100,000 loan at 8 % is $733.77. In the first month, $666.67 of that amount goes toward interest and $67.10 goes toward the principal. The second month’s payment includes $67.55 toward the principal, so you would only need to pay that much extra with the first month’s payment. Your mortgage can be paid off in almost half the time if you follow this schedule throughout the loan and see the effect with our Extra Payment Calculator.
Clearly document it when you are paying extra on your mortgage. Always use a separate check, and clearly mark the loan number and “principal prepayment” on it. Using a separate check will allow you to track it to ensure it posts toward the principal and not late fees, advanced interest, insurance premiums, or tax.
Before starting any prepayment plan, get in touch with your lender to confirm you do not have a prepayment penalty. You can sometimes get a slightly lower APR if you have a prepayment penalty, and many lenders will assume you prefer that without consulting you.
Prepaying on your mortgage can save you tens of thousands of dollars. If you have a loan of $100,000 at 8 % interest for 30 years, you will pay $264,240 in interest. That same mortgage held for 15 years produces only $172,080 in interest, saving you a whopping $92,160.
The second month’s payment includes $67.55 toward the principal, so you would only need to pay that much extra with the first month’s payment.
When you are paying extra on your mortgage, clearly document it. and see the benefit with our Extra Payment Calculator.