Mortgage Calculator To Pay Off Loan Faster

Mortgage Calculator To Pay Off Loan Faster – Many homeowners look forward to the day when their deposit is paid off and the biggest debt of their lives is behind them. What they may not realize is that the day can come much sooner if they just pay a little extra every month.

How mortgages work—and why even small extra payments can go a long way—is best understood by looking at a typical payment schedule. Basically, this is a table that lists all of your scheduled mortgage payments in chronological order, starting with the first payment and ending with the last.

Mortgage Calculator To Pay Off Loan Faster

In the amortization plan, each monthly installment is divided into two parts: interest payments and repayments. At the beginning of the amortization schedule, a large percentage of the total amount goes to interest and a small percentage goes to principal. As you continue to make your loan payments over the coming months and years, the amount allocated to interest will gradually decrease and the amount allocated to principal will increase.

Paying Off Your Mortgage Early: When And How To Do It

The total monthly or “periodic” payment (shown in column 5 of the table below) is determined by the following formula:

As shown in the table, the monthly payment remains the same throughout the term of the loan. (Due to space, only the first five months and the last five months are shown).

The monthly interest component (column 6) decreases over time when the capital is paid. It is calculated by multiplying the interest (column 3 ÷ 12) with the remaining capital balance (column 4). Note that the interest shown in column 3 is the annual interest and must be divided by 12 (months) to get the periodic interest.

The monthly payment base (column 7) is simply the total monthly payment minus that month’s interest.

Download Microsoft Excel Mortgage Calculator Spreadsheet: Xlsx Excel Loan Amortization Schedule Template With Extra Payments

The second chart here is also an amortization schedule for a 30-year 8% fixed-rate mortgage. But this time, the borrower pays $300 in principal each month. (Although 8% is a high interest rate by today’s standards, it works well for this purpose.)

This amortization chart shows that paying an extra $300 a month would reduce the life of the mortgage from 30 years to about 21 years and 10 months (262 months vs. 360). It also reduces the total amount of interest paid over the life of the mortgage by $209,948.

As you can see, the principal balance on your mortgage will decrease by the extra $300 you put on it each month. For example, if you make an additional payment of $300 per month for 24 months at the beginning of a 30-year mortgage, the additional amount to reduce your principal balance is greater than $7,200 (or $300 × $24). In this example, the savings at the end of those 24 months would actually be $7,430.42. So you would have saved more than $200 more in that period alone – and the benefits only increase as they grow over the life of the mortgage.

That’s because an ever-increasing percentage of your regular mortgage payment goes toward principal instead of interest while you keep making those $300 extra payments.

Mortgage Payoff Calculator: Accelerated Mortgage Payment Calculator With Extra Payments

An additional benefit of taking out a home loan is that it reduces your overall financial risk. If you lose your job or face another financial hardship, you’ll have far less debt to keep you up at night. Plus, the higher equity you build in your home makes it easier to get a home loan or reverse mortgage if you want.

The example above illustrates the financial benefit of quick mortgage payments. But does that mean it’s always your best choice? It depends on what other purpose you have for the money. This concept is often called opportunity cost.

For example, if you have a significant amount of credit card debt, it might be a better idea to pay an extra $300 a month on your balance. The average credit card interest rate in the database was recently 19.62%, yet most mortgages pay only a fraction of that.

Take us as an example. say you owe $10,000 on a credit card with an interest rate of 19% and you make the minimum monthly payment of $300. If you had paid that $600, you would have saved about $2,626 in interest ($1,703 vs. $4,329) and the balance would have been paid off 28 months earlier (20 months vs. 48).

Should You Pay Off Your Mortgage Early?

Then, assuming you don’t pay off the big credit card bill in the meantime, you can start applying the extra $300 to your monthly loan payments.

Also, if you’re an investor, your $300 could earn you more in the stock market than you’ll save on your mortgage. However, few of us make outrageous investments, and paying off our debt sooner is the closest most of us will ever get to safety.

Requires authors to use primary sources to support their work. These include white papers, government briefings, original reports and interviews with industry experts. If necessary, we also cite original research from other reputable publishers. Learn more about the standards we follow to produce accurate and unbiased content in our Editorial Policy. Use this calculator to calculate how much interest you’ll pay by paying 1/2 of your mortgage every two weeks instead of paying the full monthly payment. The net effect is just one extra mortgage payment per year, but the interest savings can be dramatic.

This calculator also has the option to add an additional amount (payment) to the monthly mortgage and turbocharge your interest savings. This unique 4-column format allows you to compare scenarios side-by-side, print amortization schedules, and plan your success strategy.

Early Mortgage Payoff Calculator

If you’re not sure how much to add to your payment on a given date, try this payment calculator that calculates payments over time instead of accrued interest.

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Ways To Pay Off Your Home Loan Faster

This two-week mortgage calculator makes calculating easy. It calculates your interest savings and repayment term in many different payment scenarios.

You can make bi-weekly payments instead of monthly payments, and you can make additional principal payments to see how that speeds up your payments as well.

Making mortgage payments twice a week is a strategy that can save you a lot of money in interest and pay off your debt faster.

Instead of paying every month, you pay every two weeks. This bi-weekly model differs from bi-monthly mortgage payments, which may not include additional payments.

Simple Ways To Pay Off Your Home Loan Early

With bi-weekly payments, you pay 26 instead of 12 – but smaller payments. The net effect corresponds to one year of additional monthly payments (13).

The end result of paying every two weeks is that you pay more each year, without having to pay more principal on top of the weekly payment. This requires a little sacrifice, but adds up to big savings, as you’ll see when you enter your loan payment information into this two-week mortgage calculator.

Before you start the next weekly payment, make sure it’s right for your situation. Here are some important points to consider:

Once you’ve decided that weekly payments (and/or supplements) are right for you, it’s time to set it up and start saving!

The Mortgage Overpayment Calculator That Could Save You Thousands

Many banks and mortgage companies will allow you to convert your current loan into a two-week payment plan. You have to call and ask because they don’t usually advertise this feature.

Alternatively, you can cut your mortgage payments in half and pay them every two weeks. The end result is the same, but you don’t have the simple automation you’d expect. However, first check with your bank that this meets the payment terms and does not cause prepayment penalty or other problems.

If you decide to add more principal to the required payments, you may need to check with the lender to see if anything is required to allow the extra money to go directly to the principal instead of making the required payments in advance.

The great thing about Bi-Weekly Home Loan Payment Plan is that you can easily reduce your loan term by 6-8 years.

Student Loan Payoff Calculator (updated For 2023)

Also, if you receive payments every two weeks, it may actually be easier to use bi-weekly mortgage payments than monthly payments.

If you’re still not sure if this payment method is best for you, use the weekly mortgage calculator above to see what savings you could get. Don’t forget to print out the installment payment plans as well

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