See how extra principal payments can save you money and shorten your loan term.
Enter loan details above to see your potential savings.
Understanding Mortgage Principal Payoff
Making additional payments towards the principal of your mortgage is one of the most effective ways to reduce the total interest you pay over the life of your loan and to become debt-free sooner. This calculator helps you visualize the impact of these extra payments.
How it Works
A standard mortgage payment consists of two parts: principal and interest. The principal is the amount you actually borrowed, while the interest is the cost of borrowing that money. Early in a loan term, a larger portion of your payment goes towards interest. By applying extra funds directly to the principal, you reduce the balance on which future interest is calculated. This has a compounding effect:
Reduced Total Interest Paid: Less principal means less interest accrues over time.
Shorter Loan Term: Paying down principal faster allows you to pay off your mortgage in fewer years than originally scheduled.
The Math Behind the Calculator
The calculator first determines your current monthly principal and interest (P&I) payment using the standard mortgage payment formula:
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]
Where:
M = Monthly P&I Payment
P = Principal Loan Balance
i = Monthly Interest Rate (Annual Rate / 12)
n = Total Number of Payments (Remaining Loan Term in Years * 12)
Once the original monthly payment is established, the calculator simulates the loan's amortization with and without the extra principal payment. It tracks the loan balance month by month:
Subtract total payment from the balance: New Balance = Current Balance - (Monthly P&I Payment - Interest)
If making extra principal payments: New Balance = New Balance - Extra Monthly Principal Payment
This process repeats until the loan balance reaches zero. The calculator then compares the total interest paid and the total time taken for both scenarios (with and without extra payments) to present your savings.
When to Use This Calculator
Evaluating Extra Payments: Before committing to extra payments, see the projected benefits.
Financial Planning: Understand how much you can save or how much faster you can pay off your home.
Budgeting: Determine if the extra payment fits comfortably within your monthly budget.
Interest Rate Fluctuations: While this calculator uses a fixed rate, understanding principal payoff benefits is crucial even if you consider refinancing later.
Remember that extra payments are typically applied directly to the principal balance. Always confirm with your lender how extra payments are applied to ensure they reduce your principal and not just pre-paid future installments.
function calculateMortgagePayoff() {
var loanBalance = parseFloat(document.getElementById("loanBalance").value);
var annualInterestRate = parseFloat(document.getElementById("annualInterestRate").value);
var remainingLoanTermYears = parseFloat(document.getElementById("remainingLoanTermYears").value);
var extraMonthlyPayment = parseFloat(document.getElementById("extraMonthlyPayment").value);
var resultDiv = document.getElementById("result");
// Input validation
if (isNaN(loanBalance) || isNaN(annualInterestRate) || isNaN(remainingLoanTermYears) || isNaN(extraMonthlyPayment) ||
loanBalance <= 0 || annualInterestRate < 0 || remainingLoanTermYears <= 0 || extraMonthlyPayment 0) {
originalMonthlyPayment = loanBalance * (monthlyInterestRate * Math.pow(1 + monthlyInterestRate, numberOfPayments)) / (Math.pow(1 + monthlyInterestRate, numberOfPayments) – 1);
} else {
// Handle zero interest rate case (though uncommon for mortgages)
originalMonthlyPayment = loanBalance / numberOfPayments;
}
// — Simulation with NO extra payment —
var currentBalanceNoExtra = loanBalance;
var totalInterestPaidNoExtra = 0;
var monthsToPayoffNoExtra = 0;
while (currentBalanceNoExtra > 0) {
var interestForMonth = currentBalanceNoExtra * monthlyInterestRate;
var principalForMonth = originalMonthlyPayment – interestForMonth;
// Adjust last payment to avoid overpayment
if (principalForMonth > currentBalanceNoExtra) {
principalForMonth = currentBalanceNoExtra;
originalMonthlyPayment = interestForMonth + principalForMonth; // Recalculate payment for last month
}
totalInterestPaidNoExtra += interestForMonth;
currentBalanceNoExtra -= principalForMonth;
monthsToPayoffNoExtra++;
// Prevent infinite loop for edge cases or rounding errors
if (monthsToPayoffNoExtra > 10000) {
resultDiv.innerHTML = "Calculation error: Too many months. Please check your inputs.";
return;
}
}
// — Simulation with extra payment —
var currentBalanceWithExtra = loanBalance;
var totalInterestPaidWithExtra = 0;
var monthsToPayoffWithExtra = 0;
var totalPaidWithExtra = 0;
while (currentBalanceWithExtra > 0) {
var interestForMonth = currentBalanceWithExtra * monthlyInterestRate;
var totalPaymentThisMonth = originalMonthlyPayment + extraMonthlyPayment;
var principalForMonth = totalPaymentThisMonth – interestForMonth;
// Adjust last payment to avoid overpayment
if (principalForMonth > currentBalanceWithExtra) {
principalForMonth = currentBalanceWithExtra;
// Recalculate total payment for the last month
totalPaymentThisMonth = interestForMonth + principalForMonth;
}
totalInterestPaidWithExtra += interestForMonth;
currentBalanceWithExtra -= principalForMonth;
monthsToPayoffWithExtra++;
totalPaidWithExtra += totalPaymentThisMonth; // Track total amount paid
// Prevent infinite loop
if (monthsToPayoffWithExtra > 10000) {
resultDiv.innerHTML = "Calculation error: Too many months with extra payments. Please check your inputs.";
return;
}
}
var interestSavings = totalInterestPaidNoExtra – totalInterestPaidWithExtra;
var monthsSaved = monthsToPayoffNoExtra – monthsToPayoffWithExtra;
var yearsSaved = Math.floor(monthsSaved / 12);
var remainingMonthsSaved = monthsSaved % 12;
var formattedInterestSavings = interestSavings.toLocaleString(undefined, { minimumFractionDigits: 2, maximumFractionDigits: 2 });
var formattedLoanBalance = loanBalance.toLocaleString(undefined, { minimumFractionDigits: 2, maximumFractionDigits: 2 });
var formattedOriginalMonthlyPayment = originalMonthlyPayment.toLocaleString(undefined, { minimumFractionDigits: 2, maximumFractionDigits: 2 });
var formattedExtraMonthlyPayment = extraMonthlyPayment.toLocaleString(undefined, { minimumFractionDigits: 2, maximumFractionDigits: 2 });
var yearsOriginal = Math.floor(monthsToPayoffNoExtra / 12);
var monthsOriginal = monthsToPayoffNoExtra % 12;
var yearsWithExtra = Math.floor(monthsToPayoffWithExtra / 12);
var monthsWithExtra = monthsToPayoffWithExtra % 12;
resultDiv.innerHTML =
`
Your Savings Summary
Original Loan Balance: $${formattedLoanBalance}
Original Monthly P&I Payment: $${formattedOriginalMonthlyPayment}
Extra Monthly Principal Payment: $${formattedExtraMonthlyPayment}
Total Interest Saved: $${formattedInterestSavings}
Original Payoff Time: ${yearsOriginal} years, ${monthsOriginal} months
New Payoff Time: ${yearsWithExtra} years, ${monthsWithExtra} months
Time Saved: ${yearsSaved} years, ${remainingMonthsSaved} months`;
}