Extra Mortgage Payments Calculator

Want to build your home equity quicker? Use this free calculator to see how even small extra payments will save you years of payments and thousands of Dollars of additional interest cost.

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Exercising Additional Payment Options

When you sign on for a 30-year mortgage, you know you're in it for the long haul. You might not even think about trying to pay off your mortgage early. After all, what's the point? Unless you're doubling up on your payments every month, you aren't going to make a significant impact on your bottom line — right? You'll still be paying off your loan for decades — right?

Not necessarily. Even making small extra payments over time can shave years off your loan and save you thousands of dollars in interest, depending on the terms of your loan.

A Little Goes a Long Way

One of the most common ways that people pay extra toward their mortgages is to make bi-weekly mortgage payments. Payments are made every two weeks, not just twice a month, which results in an extra mortgage payment each year. There are 26 bi-weekly periods in the year, but making only two payments a month would result in 24 payments.

Instead of paying twice a week, you can achieve the same results by adding 1/12th of your mortgage payment to your monthly payment. Over the course of the year, you will have paid the additional month. Doing so can shave four to eight years off the life of your loan, as well as tens of thousands of dollars in interest.

However, you don't have to pay that much to make an impact. Even paying $20 or $50 extra each month can help you to pay down your mortgage faster. For example, if you have a 30-year $250,000 mortgage with a 5 percent interest rate, you will pay $1,342.05 each month in principal and interest alone. You will pay $233,133.89 in interest over the course of the loan. If you pay an additional $50 per month, you will save $21,298.29 in interest over the life of the loan and pay off your loan two years and four months sooner than you would have.

You can also make one-time payments toward your principle with your yearly bonus from work, tax refunds, investment dividends or insurance payments. Any extra payment you make to your principle can help you reduce your interest payments and shorten the life of your loan.

Considerations for Extra Payments

Paying off your mortgage early isn't always a no-brainer. Though it can help many people save thousands of dollars, it's not always the best way to maximize savings.

Compare your potential savings to your other debts. For example, if you have credit card debt at 20 percent or more, it makes more sense to pay it off before putting any extra money toward your mortgage that has only a 5 percent interest rate. Also consider what other investments you can make with the money that might give you a higher return. If you can make more with an investment, you can make a bigger financial impact than paying off your mortgage.

Paying extra toward your mortgage may not make sense if you aren't planning to stay in your home for more than a few years. You won't pay down your equity fast enough to make it worth your while if you are planning to move in less than five to 10 years. You should also carefully evaluate the trends in your local housing market before you pay extra toward your mortgage.

Calculating Your Savings

Use the above calculator to determine your potential savings by making extra payments toward your mortgage. Put in any amount that you want, from $10 to $1,000, to find out what you can save over the life of your loan. The results can help you weigh your financial options to see if paying down your mortgage will have the most benefits or if you should focus your efforts on other investment options.

 

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