Pay Off Mortgage Early Calculator Amortization Schedule

Pay Off Mortgage Early Calculator Amortization Schedule – Many homeowners are looking forward to the day when they pay off their mortgage and have the biggest debt of their life behind them. What they may not realize is that that day could come much sooner if they simply pay a little more each month.

The best way to understand how mortgages work and why even small extra payments can make a big difference is through a typical repayment schedule. It’s essentially a spreadsheet that lists all of your mortgage payments in chronological order, from the first payment to the last.

Pay Off Mortgage Early Calculator Amortization Schedule

An amortization schedule divides each monthly payment into two parts: interest payments and principal payments. At the beginning of the amortization schedule, a large percentage of the total payment goes to interest and a small percentage to principal. As you continue to pay off your mortgage over the coming months and years, the amount set aside for interest will gradually decrease and the amount set aside for principal will increase.

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

As can be seen from the table, the monthly installment remains unchanged during the term of the loan. (To save space, only the first five months and the last five months are displayed.)

The interest portion of the monthly installment (column 6) decreases over time as the principal is paid off. It is calculated by multiplying the interest rate (column 3 ÷ 12) and the capital balance (column 4). Please note that the interest rate shown in column 3 is the annual interest rate and must be divided by 12 (months) to obtain the periodic interest rate.

The capital part of the monthly repayment (column 7) is simply the amount of the entire monthly payment, minus the interest for the given month.

Should You Make Extra Mortgage Payments? Compare Pros & Cons

The second table also shows the amortization schedule for a 30-year, 8% fixed-rate mortgage. This time, however, the borrower pays an additional $300 per month toward the principal. (Although 8% is a high interest rate by today’s standards, we use it here as an illustration.)

This repayment schedule shows that if you pay $300 per month, your mortgage term will go from 30 years to about 21 years and 10 months (262 months vs. 360). It also reduces the total interest paid over the life of the mortgage by $209,948.

As you can see, your mortgage principal is reduced by more than $300 per month. For example, if you pay an additional $300 per month for 24 months at the beginning of a 30-year mortgage, the reduction in your principal balance is more than $7,200 (or $300 × $24). In this example, the savings at the end of those 24 months would actually be $7,430.42. That way, you can save more than $200 in this period alone, and the benefits continue to grow as they grow over the life of your mortgage.

That’s because while you’re still paying the extra $300, a larger percentage of your regularly scheduled mortgage payments are going toward paying off the principal balance of the loan, rather than interest.

How To Pay Off Your Mortgage Early

Another benefit of reducing your mortgage debt is that it reduces your overall financial risk. If you lose your job or face another financial crisis, you’ll have far less debt to keep you going at night. Also, the more equity you build up in your home, the easier it will be to get a home loan or reverse mortgage if you ever want to.

The financial advantages of faster mortgage repayment are well illustrated by the above example. But does that mean it’s always the best choice? It depends on how you can use the money differently. This concept is often called opportunity cost.

For example, if you have significant credit card debt, it may be a better idea to pay an additional $300 per month to cover the balance. The average credit card interest rate in the database was recently 19.62%, while most mortgages only charge a fraction of that amount.

For example, let’s say you owe $10,000 on a credit card with a 19% interest rate and make a minimum payment of $300 a month. If you increase that payment to $600, you’ll save about $2,626 in total interest ($1,703 vs. $4,329) and get the rest 28 months earlier (20 months vs. 48).

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Then, if you don’t have another big credit card bill by then, you can start setting aside another $300 for your monthly mortgage payments.

Likewise, if you’re an investment genius, your $300 could earn you more in the stock market than you save on your mortgage. However, few of us are good at investing, and paying off our mortgage quickly is the safest thing most of us will ever achieve.

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Interest rate – the given annual interest rate of the loan. For your convenience, we’ve listed local New York mortgage rates below so you can see what rates are currently available.

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Loan Term in Years – Most fixed rate mortgages in the United States are amortized over 30 years. Other popular home loan terms are 10, 15 and 20 years. Some foreign countries, such as Canada and the United Kingdom, have loans with repayment terms of 25, 35, and even 40 years.

Annual installments – defaults to 12 to calculate monthly installments for a loan repaid over a given year. Enter 24 if you want to pay twice a month, or 26 if you want to pay every two weeks.

Loan start date – the date when repayment of the loan begins, usually one month after the loan is granted.

Optional Extra Payment – If you want to add an extra amount to each monthly payment, add that amount here and the loan will be paid off faster. If an additional fee is charged, the calculator will show how many installments and how many years you saved in this way compared to the term of the original loan.

What Is Amortization?

To edit the variable amounts, click [Allow Editing] on the yellow banner at the top of the table.

By default, this calculator is selected for monthly repayments and a 30-year loan term. A person can use the same spreadsheet to calculate weekly, bi-weekly or monthly payments on a shorter term personal or car loan.

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The chart below shows the mortgage rates available locally to help you estimate your monthly mortgage payment.

How Is Amortization Used To Pay Off Loans?

Research conventional mortgages, FHA loans, USDA loans and VA loans to see which option is right for you. If you take out a loan or mortgage, it’s important to keep track of your payments. However, calculating payment amounts and planning a schedule can be difficult. This is where Excel’s amortization schedule template comes in handy. A loan repayment schedule is a table that details all the payments to be made during the loan period. The payment amounts are generated by the amortization calculator.

“Amortizing” a loan means repaying the entire balance, including interest and principal, in regular, increasing installments. Using the amortization template in Excel, the repayment installment and the interest amount are displayed. In the beginning, the payments are mainly for interest payments, but over time, the majority of the payments are for paying down the principal.

The following amortization schedule templates provide a framework for easily determining what is paid and what is receivable. They also list all scheduled payments over the life of the loan and show the total remaining balance. Just enter the total loan amount, interest rate, loan term and payment frequency, and the calculator will do the rest. We provide several templates that you can use for different loans – choose the one that suits you best and start managing your finances more efficiently. You can also use Excel’s built-in depreciation statement template by following the instructions below.

This comprehensive Microsoft Excel amortization schedule template can be used for many types of loans, including personal loans, mortgages, business loans, and auto loans. It calculates the interest and principal repayment for a given loan amount for a specified period. This amortization spreadsheet template for Excel displays the remaining balance after each payment

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