Mortgage Acceleration Calculator (2024)

FAQs

How do you calculate accelerated mortgage payments? ›

Accelerated payments are calculated by assuming there are only 4 weeks in a month. It is calculated by dividing the monthly payment by 4. Since you pay 52 weekly payments, by the end of the year, you have paid 4 additional weekly payments, i.e. a complete monthly payment.

Making additional principal payments will shorten the length of your mortgage term and allow you to build equity faster. Because your balance is being paid down faster, you'll have fewer total payments to make, in-turn leading to more savings.

A mortgage accelerator loan is a mortgage program that purports to help the homeowner pay their mortgage off at a faster speed than a more traditional loan. The appeal of this kind of loan is that faster repayment means that money is saved in the form of less interest owed over the life of the loan.

Increase your mortgage payment

Increase the size of your regular mortgage payment to take a large chunk off your mortgage principal. Choose a higher payment amount when you arrange your mortgage, or at any time during the term. This lets you pay down the principal faster.

But if you have a relatively recent loan, you're likely looking at tens of thousands of dollars in savings and cutting as much as eight years off the life of your loan. Obviously, not everyone can afford to make two extra mortgage payments a year. You're basically increasing your housing costs by 16%.

Throwing in an extra $500 or $1,000 every month won't necessarily help you pay off your mortgage more quickly. Unless you specify that the additional money you're paying is meant to be applied to your principal balance, the lender may use it to pay down interest for the next scheduled payment.

An acceleration clause is a provision in a loan agreement that allows the lender to require the borrower to immediately repay all of their outstanding loan if certain conditions are not met. It is, essentially, a protective measure for lenders. This might sound scary, but don't let it cause you to panic.

Who is most benefited by an acceleration clause in a mortgage? ›

Most commonly, the seller or lender benefits from an acceleration clause in a real estate contract. An acceleration clause can also benefit any real estate investors who have financial interests in the property. An acceleration clause helps manage the risk of lending money.

For example, assume a borrower with a five year mortgage loan fails to make a payment in the third year. The terms of the loan include an acceleration clause which states the borrower must repay the remaining balance if one payment is missed.

The additional amount will reduce the principal on your mortgage, as well as the total amount of interest you will pay, and the number of payments.

Ideally, you want your extra payments to go towards the principal amount. However, many lenders will apply the extra payments to any interest accrued since your last payment and then apply anything left over to the principal amount. Other times, lenders may apply extra funds to next month's payment.

The interest rate on a loan directly affects the duration of a loan. Note: The interest rate is calculated using the hit and trial method. Therefore, it takes 30 years to complete the loan of $150,000 with $1,000 per monthly installment at a 0.585% monthly interest rate.

If your loan amount is $100,000, you would multiply $100,000 by 0.005 for a monthly payment of $500. A simpler calculation may be first multiplying the loan amount of $100,000 by the interest rate of 0.06 to get $6,000 of yearly interest, then dividing that $6,000 by 12 to get your monthly payment of $500.

The accelerated weekly payment is calculated by dividing your monthly payment by four. You would then make 52 weekly payments. Just like the accelerated biweekly payments, you are in effect paying an additional monthly payment each year.

Accelerated payment occurs when a borrower speeds up the repayment of a loan. This can be done by: Shortening the amortization period, which increases the amount of each regular payment. Making payments more frequently—for example, weekly or bi-weekly instead of once a month.

The monthly payment is calculated to payoff the entire mortgage balance at the end of the term. The term is typically 30 years. After any fixed interest rate period has passed, the interest rate and payment adjusts at the frequency specified. A Fully Amortizing ARM will also have a maximum rate that it will not exceed.