If you are looking for a mortgage with extra payments calculator (or an additional mortgage payment calculator), you've found the right place. This tool gives you excellent support to find out how paying extra on a mortgage, in the form of extra principal payment, would affect your interest cost and repayment term. You can also apply the tool to see how to pay off a mortgage faster by making extra mortgage payments by, for example, making one extra mortgage payment a year or by switching to an accelerated bi-weekly mortgage payment option.
We designed a payment summary to provide you with a better insight by comparing the results with the original schedule and learning the differences between the two options. You can also follow the mortgage balance's progress in the dynamic graph and read all of the payment details in the amortization table with extra payments.
In the following, we show you how to pay off a mortgage faster, explain different ways for accelerated mortgage payments, and tell you what options you can find in the present mortgage calculator. With extra payments and a lump sum you can, for example, accelerate your mortgage remarkably. You can also turn to an accelerated bi-weekly or weekly payments, which might also be a feasible way of paying less on the mortgage.
Because of all of the features in the additional mortgage payment calculator, you can apply our calculator as a:
- Mortgage calculator with multiple extra payments;
- Biweekly mortgage calculator with extra payments; and
- Mortgage calculator with extra payments and lump sum.
If you would like to include additional fees in your mortgage estimation, check our mortgage calculator with taxes and insurance, which gives you an excellent chance to analyze your loan with all extra costs.
If you are shopping around home loans, check our mortgage comparison calculator, which will give you great support in your decision-making.
Ways of paying extra on a mortgage and accelerate mortgage payment
The lifespan of mortgages typically stretches out over considerable time: the most common mortgage terms are 15 years and 30 years. In finance, just like in personal life, many things can change over such a long time. For example, let's assume that you just started working and took a 30 year mortgage. As you are at the beginning of your career path, you can expect a considerable improvement in your income. Since the such a long mortgage term is typically associated with not only higher uncertainty but a larger finance charge on the loan, you should consider accelerating your mortgage payment when your monthly salary increases.
Since making extra mortgage payments means additional payment on the principle, your mortgage balance will drop faster, resulting in a shorter repayment term and a lower interest cost.
So, how to pay off a mortgage faster? There are multiple ways of paying extra on a mortgage to accelerate mortgage payment. In the following, we introduce four ways of making extra mortgage payments that you can also find in the present mortgage calculator with extra payments:
- Changing payment frequency
One feasible way to accelerate mortgage payment is to turn to an accelerated bi-weekly or weekly repayment plan. But what does accelerated bi-weekly mortgage payments mean? It means that you make a half-payment every two weeks instead of a full payment once each month. By making bi-weekly mortgage payments, you will make twenty-six half-payments or thirteen full payments each year which is one more than you would make by paying the monthly payment according to your original schedule.
- Extra principal payment periodically
Another option you might consider when your monthly salary raises permanently is to increase your monthly payment. In this way, the additional principal payment will reduce the mortgage balance each month.
- Making extra mortgage payments yearly
If you have additional income in a year and expect to receive it each year, you may devote extra money to accelerate mortgage payment.
- Lump sum payment
When you gain an extra one-time income, you may channel it into your mortgage balance. Note, that even a single extra payment can save considerable interest and may reduce the mortgage term.
In addition, you may turn to refinance your mortgage, where you may reduce the interest cost not only because of the higher payments but also due to the lower interest rate.
What is the effect of paying extra principal on a mortgage?
As we mentioned above, when paying extra on a mortgage while keeping the amortization term the same, the extra cash directly reduces the mortgage balance, which constitutes the principal part of the loan. The immediate effect of the additional principal payment is the reduction of mortgage balance, which is the base of the interest payment in the following period. Therefore, the interest rate is applied to a lower balance from every point after first extra principal payment onward, which results in a shorter mortgage term and lower total interest charge.
For example, let's say your mortgage balance or principal is $10,000 with a $100 monthly payment, and a 10% annual rate. You decide to pay $1,000 extra once a year, that is, one extra mortgage payment a year. Let's see what is the effect of paying extra principal on a mortgage.
Original balanceMortgage with extraYear #1: interest10,000 * 0.1 = $1,00010,000 * 0.1 = $1,000Year #1: payment100 * 12 = $1,2001,200 + 1,000 = $2,200Year #1: principal1,200 - 1,000 = $2002,200 - 1,000 = $1,200Year #1: balance10,000 - 200 = $9,80010,000 - 1,200 = $8,800Year #2: interest9,800 * 0.1 = $9808,800 * 0.1 = $880Year #2: payment$1,200$2,200Year #2: principal1,200 - 980 = $2202,200 - 880 = $1,320Year #2: balance9,800 - 220 = $8,5808,800 - 1,320 = $7,480Note, that the actual balances differ from the above figures due to the monthly computations applied on mortgage balances and the compounding effect, further amplifying its effect in the longer-term.
You can see that the $1,000 extra payment reduces your mortgage balance by the same amount and results in a lower interest charge afterwards. In other words, each dollar of an extra payment goes towards reducing the principal balance of your loan, which is the base of interest calculations afterwards. As you reduce the principal, you reduce the total interest paid and the length of time it takes to pay the loan. Therefore, you will experience an accelerated mortgage amortization with extra payments.
How to use the mortgage with extra payments calculator?
We designed this tool in a super simple way: follow the following two steps and you will get your results immediately:
- Original schedule - Here, you can set your original mortgage schedule.
- Mortgage balance - Either the remaining balance or, in the case of a new loan, is the original loan value.
- Interest rate - Yearly rate of interest or APR.
- Loan term - The remaining or original loan term.
- Due date - The closest date when the monthly payment is due.
- Interest calculation method (advanced mode) - The compounding frequency.
- Extra payment specification - Here, you can specify the four types of paying extra on a mortgage and the date they will be paid:
- Payment frequency - Here you can switch from a monthly schedule to accelerated weekly or accelerated bi-weekly mortgage payments.
- Periodic extra payment - The amount of money you add to your payment in each period.
- Yearly extra payment - You can set one extra mortgage payment a year or two payments with their specific payment date.
- Lump-sum prepayment - Here you can set a single, one-time extra payment on a given day.
Payment summary - You can read and compare the results for the original schedule and the schedule with extra payment.
Balances and schedules - You can also follow your mortgage balances' progress in a dynamic chart and amortization table with extra payments where you can see the mortgage amortization schedule with extra payments.
Disclaimer
You should consider the mortgage calculator with extra payments as a model for financial approximation. All payment figures, balances, and interest figures are estimates based on the data you provided in the specifications that are, despite our best effort, not exhaustive.
For this reason, we created the calculator for instructional purposes only. Still, if you experience a relevant drawback or encounter any inaccuracy, we are always pleased to receive useful feedback and advice.
Tibor Pal, PhD candidate
Original schedule
Mortgage amount
$
Interest rate
%
Loan term
yrs
Due date
Extra payment specification
Payment frequency
Accelerated bi-weekly
Periodic extra payment
$
Starting from
Yearly extra payment
Never
Lump sum prepayment
$
Paid on
Payment summary
Original scheduleWith extra paymentDifferencePayoff dateNov. 25, 2042Jul. 22, 20402 years and 4 months earlierPayment$854.08 monthly$427.04 bi-weekly$71.17 more in a monthRepayment term20 years17 years and 8 months2 years and 4 months earlierTotal interest$69,978.40$60,525.99$9,452.41 lessTotal payment$204,978.40$195,525.99$9,452.41 less