Over the course of a loan amortization you will spend hundreds, thousands, and maybe even hundreds or thousands in interest. By making a small additional monthly payment toward principal, you can greatly accelerate the term of the loan and, thereby, realize tremendous savings in interest payments. Use our extra payment calculator to determine how much more quickly you may be able to pay off your debt.
Loan Information
Total Interest
Making extra payments of $500/month could save you$60,798 in interest over the life of the loan.
You could own your house 13years sooner than under your current payment.
These calculations are tools for learning more about the mortgage process and are for educational/estimation purposes only. Payment shown does not include taxes, insurance, or mortgage insurance (if applicable). This does not constitute an offer or approval of credit. Contact a PrimeLending home loan officer for actual estimates.
For example, a Conventional fixed rate loan with the terms purchase price of $312,500, on a loan term of 360 months, down payment of 20%, and an interest rate of 6.5%, will result in an annual percentage rate of 6.598% with $3,613 in APR fees. Rate pulled 09/02/22, rates change daily. Loans are subject to borrower qualifications, including income, property evaluation, and final credit approval.
Based on the numbers you provided, here is your estimated savings if you make extra payments. Want to see more options? Enter new numbers, calculate and compare.
Since your interest is calculated on your remaining loan balance, making additional principal payments every month will significantly reduce your interest payments over the life of the loan. By paying more principal each month, you incrementally lower the principal balance
principal balance
The principal balance, in regard to a mortgage, loan, or other instrument of debt, is the amount due and owed to satisfy the payoff of an underlying obligation. It is distinct from, and does not include, interest or other charges.
https://en.wikipedia.org › wiki › Principal_balance
If you pay $100 extra each month towards principal, you can cut your loan term by more than 4.5 years and reduce the interest paid by more than $26,500. If you pay $200 extra a month towards principal, you can cut your loan term by more than 8 years and reduce the interest paid by more than $44,000.
When you pay extra on your principal balance, you reduce the amount of your loan and save money on interest. Keep in mind that you may pay for other costs in your monthly payment, such as homeowners' insurance, property taxes, and private mortgage insurance (PMI).
Making extra payments of $500/month could save you $60,798 in interest over the life of the loan. You could own your house 13 years sooner than under your current payment. These calculations are tools for learning more about the mortgage process and are for educational/estimation purposes only.
Since your interest is calculated on your remaining loan balance, making additional principal payments every month will significantly reduce your interest payments over the life of the loan. By paying more principal each month, you incrementally lower the principal balance and interest charged on it.
Pay extra each month. Bi-weekly payments instead of monthly payments. Making one additional monthly payment each year. Refinance with a shorter-term mortgage.
Let's say you currently owe $200,000 on your mortgage and you want to pay it off in 5 years or 60 months. In this case, you'll need to increase your payments to about $3,400 per month.
Payments made on a mortgage in addition to your regular monthly payment will count toward the loan principal. Extra payments can be beneficial because they apply directly to your loan principal, helping you pay off your loan faster and with fewer interest fees.
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%.
However, there are also potential drawbacks to consider:
Liquidity Concerns. Prepaying your mortgage ties up your funds in your home, potentially leaving you with less liquidity for other financial needs or opportunities.
Generally, no set time within the month is best to make an extra payment to the principal, however, it has been said that extra payments made towards the end of a month are the best option.
Closed mortgages allow you to make extra principal prepayments up to 20% of the original mortgage principal per year. This type of payment can be made on any business day of the year and with a minimum of $100.
Making a lump sum payment not only reduces the total interest you pay but also speeds up your journey to a debt-free life. With each extra payment, more of your money goes toward reducing the principal, which, in turn, reduces the overall amortization.
Payments made on a mortgage in addition to your regular monthly payment will count toward the loan principal. Extra payments can be beneficial because they apply directly to your loan principal, helping you pay off your loan faster and with fewer interest fees.
Introduction: My name is Carlyn Walter, I am a lively, glamorous, healthy, clean, powerful, calm, combative person who loves writing and wants to share my knowledge and understanding with you.
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