Calculate your mortgage payments, see the impact of extra payments, and understand your total interest paid over time. This advanced tool helps you visualize how accelerating your loan repayment can lead to significant savings.
Mortgage Payment Calculator with Extra Payments
The total amount borrowed for your mortgage.Please enter a valid loan amount.
The yearly interest rate on your mortgage.Please enter a valid interest rate between 0 and 100.
15 Years
30 Years
20 Years
25 Years
40 Years
The total duration of your mortgage loan in years.
Additional amount paid monthly to reduce principal faster.Please enter a valid extra payment amount.
Your Mortgage Results
$0
Key Assumptions
Loan Amount: $0
Interest Rate: 0%
Loan Term: 0 Years
Extra Monthly Payment: $0
Original Monthly Payment
$0
Total Paid (No Extra Payments)
$0
Total Interest Paid (No Extra Payments)
$0
New Monthly Payment (with Extra)
$0
New Total Paid (with Extra)
$0
New Total Interest Paid (with Extra)
$0
Loan Payoff Time (Years)
0 Years
Formula Used: Monthly mortgage payment is calculated using the P&I formula: M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]. Total interest is the sum of all monthly payments minus the principal. With extra payments, the principal is reduced faster, recalculating subsequent interest and shortening the loan term.
Amortization Comparison
Amortization Schedule Comparison
Comparison of Amortization Schedules
Month
Payment
Principal
Interest
Balance
Balance (Extra Pmt)
Interest Saved (This Month)
Enter loan details to see the amortization schedule.
Bankrate Mortgage Calculator with Extra Payments Explained
What is a Bankrate Mortgage Calculator with Extra Payments?
A Bankrate mortgage calculator with extra payments is a sophisticated online tool designed to help homeowners and prospective buyers understand the financial implications of making additional payments towards their mortgage principal beyond the regularly scheduled monthly payment. Unlike standard mortgage calculators that focus solely on the basic loan structure (principal, interest rate, term), this advanced version allows users to input a specific extra amount they plan to pay each month. The calculator then projects how these accelerated payments will affect the total interest paid over the life of the loan, the time it takes to pay off the mortgage, and the overall amount paid. It's particularly useful for those looking to build equity faster, reduce their long-term interest costs, or achieve mortgage freedom sooner.
Who should use it?
Homeowners looking to pay down their mortgage faster.
Individuals wanting to understand the long-term interest savings from making extra payments.
First-time homebuyers planning their financial strategy for a new mortgage.
Anyone seeking to optimize their debt repayment and financial health.
Common Misconceptions:
Myth: Extra payments are automatically applied to the principal. Reality: While most lenders apply extra payments to principal, it's crucial to confirm this with your lender to ensure the payment is correctly allocated and not applied to future interest or fees.
Myth: Only large extra payments make a significant difference. Reality: Even modest extra payments, consistently made over time, can lead to substantial interest savings and a shorter loan term. The impact grows exponentially the earlier you start.
Myth: Paying off a mortgage early is always the best financial decision. Reality: While beneficial for saving interest, the decision depends on your overall financial goals. Investing the extra money elsewhere might yield higher returns, especially if interest rates on other investments exceed your mortgage rate.
Mortgage Payment Formula and Mathematical Explanation
The foundation of any mortgage calculation, including those with extra payments, relies on the standard monthly payment formula. This formula determines the fixed amount needed to amortize a loan over a set period. The core formula for calculating the monthly payment (M) is:
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]
Where:
M = Your total monthly mortgage payment (principal and interest only).
P = The principal loan amount (the total amount you borrow).
i = Your monthly interest rate (annual interest rate divided by 12).
n = The total number of payments over the loan's lifetime (loan term in years multiplied by 12).
Variable Explanations and Typical Ranges:
Variable
Meaning
Unit
Typical Range
P (Principal Loan Amount)
The initial amount borrowed for the home purchase.
USD ($)
$50,000 – $1,000,000+
Annual Interest Rate
The yearly percentage charged by the lender.
%
3% – 10% (fluctuates with market conditions)
i (Monthly Interest Rate)
Annual rate divided by 12.
Decimal (e.g., 0.065 / 12)
0.0025 – 0.00833
Loan Term (Years)
Duration of the loan agreement.
Years
15, 20, 25, 30 years are common
n (Total Number of Payments)
Loan term in years multiplied by 12.
Months
180, 240, 300, 360 months
Extra Monthly Payment
Additional amount paid beyond P&I to reduce principal.
USD ($)
$50 – $500+ (user-defined)
How Extra Payments Affect the Calculation:
When you make an extra monthly payment, that additional amount goes directly towards reducing your loan's principal balance. Since interest is calculated on the remaining principal, lowering the principal faster means less interest accrues in subsequent periods. This creates a snowball effect:
Reduced Principal: The extra payment directly decreases the outstanding principal.
Lowered Interest Accrual: Future interest calculations are based on this lower principal.
Accelerated Payoff: The loan is paid off sooner than the original term.
Significant Interest Savings: The total interest paid over the life of the loan is substantially reduced.
The calculator simulates this by recalculating the amortization schedule with the increased payment amount each month until the balance reaches zero. It determines the new payoff time and total interest savings.
Practical Examples (Real-World Use Cases)
Example 1: Aggressively Paying Down a 30-Year Mortgage
Scenario: Sarah buys a home and takes out a $400,000 mortgage at 6.5% annual interest for 30 years. She decides to pay an extra $300 per month towards her principal.
Inputs:
Loan Amount: $400,000
Annual Interest Rate: 6.5%
Loan Term: 30 Years
Extra Monthly Payment: $300
Estimated Outputs (from calculator):
Original Monthly Payment (P&I): ~$2,528.56
New Monthly Payment (with extra): ~$2,828.56
Original Payoff Time: 30 Years
New Payoff Time: ~23 Years and 6 Months (saving ~6.5 years)
Total Interest Paid (Original): ~$510,281.60
Total Interest Paid (with Extra): ~$410,117.11
Total Interest Saved: ~$100,164.49
Financial Interpretation: By adding just $300 extra each month, Sarah saves over $100,000 in interest and pays off her mortgage nearly 6.5 years earlier. This demonstrates the powerful long-term benefits of consistent extra payments.
Example 2: Shorter Term with Moderate Extra Payment
Scenario: John finances a $250,000 home with a 15-year mortgage at 7.0% interest. He wants to pay it off even faster and adds an extra $150 per month.
Inputs:
Loan Amount: $250,000
Annual Interest Rate: 7.0%
Loan Term: 15 Years
Extra Monthly Payment: $150
Estimated Outputs (from calculator):
Original Monthly Payment (P&I): ~$2,141.82
New Monthly Payment (with extra): ~$2,291.82
Original Payoff Time: 15 Years
New Payoff Time: ~12 Years and 9 Months (saving ~2 years and 3 months)
Total Interest Paid (Original): ~$135,527.60
Total Interest Paid (with Extra): ~$111,362.35
Total Interest Saved: ~$24,165.25
Financial Interpretation: Even with a shorter original loan term, adding $150 monthly significantly reduces the payoff time and saves over $24,000 in interest. This highlights that extra payments are valuable regardless of the initial loan term.
How to Use This Bankrate Mortgage Calculator with Extra Payments
Using this calculator is straightforward. Follow these steps to get personalized results:
Enter Loan Amount: Input the total principal amount you are borrowing for your mortgage.
Enter Annual Interest Rate: Provide the yearly interest rate for your loan.
Select Loan Term: Choose the original duration of your mortgage from the dropdown menu (e.g., 15, 30 years).
Enter Extra Monthly Payment: Specify the additional amount, above your regular principal and interest payment, that you intend to pay each month. Ensure this is purely for principal reduction.
Click "Calculate": The calculator will process your inputs and display the results.
How to Read Results:
Main Result (Total Interest Saved): This is the most prominent figure, showing the total dollar amount you can save on interest by making the specified extra payments.
Intermediate Values: These provide a breakdown of your original payments, total costs without extra payments, and the new figures reflecting your accelerated payoff. Key metrics include:
Original vs. New Monthly Payment
Total Paid (Original vs. New)
Total Interest Paid (Original vs. New)
New Loan Payoff Time
Amortization Schedule Comparison: This table shows a month-by-month breakdown comparing the loan repayment with and without extra payments, highlighting interest saved each month and the remaining balance.
Chart: The dynamic chart visually represents the cumulative interest paid and the loan balance over time for both scenarios (with and without extra payments).
Decision-Making Guidance:
Use the results to make informed decisions:
Assess Affordability: Can you comfortably afford the new, higher monthly payment (Original + Extra)?
Evaluate Savings Potential: Is the amount of interest saved significant enough to justify the extra monthly outlay?
Prioritize Goals: If you have other financial goals (e.g., investing, retirement savings), compare the guaranteed savings from paying down the mortgage against potential returns from other investments. Consider consulting a financial advisor for personalized advice.
Lump Sum Payments: The calculator assumes consistent monthly extra payments. You can also explore the impact of occasional lump-sum payments, though this calculator focuses on regular additions.
Key Factors That Affect Bankrate Mortgage Calculator Results
Several crucial factors influence the accuracy and outcomes of a mortgage calculator with extra payments:
Interest Rate: A higher interest rate dramatically increases the total interest paid over time. Consequently, making extra payments on high-interest loans yields more significant savings compared to low-interest loans. This is why focusing extra payments on higher-rate mortgages is often financially prudent.
Loan Term: Longer loan terms (e.g., 30 years vs. 15 years) mean more interest accrues. Extra payments have a more profound impact on shortening longer terms and reducing the massive amount of interest accumulated over decades.
Loan Amount: Larger principal amounts naturally result in higher monthly payments and greater total interest costs. Therefore, extra payments on larger loans generally lead to larger absolute dollar savings in interest.
Extra Payment Amount: The size of your extra payment is directly proportional to the savings and payoff acceleration. A larger extra payment will result in faster principal reduction, quicker payoff, and more substantial interest savings. Consistent extra payments are key.
Timing of Extra Payments: Making extra payments earlier in the loan term is far more effective. In the early years of a mortgage, a larger portion of your regular payment goes towards interest. Applying extra principal payments early reduces the base on which future interest is calculated, maximizing long-term savings.
Lender Fees and Policies: Some lenders may charge fees for extra payments or have specific procedures for application (e.g., requiring payments to be designated for principal). Always verify your lender's policies to ensure extra payments are applied as intended and don't incur penalties. This calculator assumes direct application to principal.
Inflation and Opportunity Cost: While paying down a mortgage saves guaranteed interest, consider the opportunity cost. If you could potentially earn a higher return by investing that extra money (factoring in risk and taxes), it might be a better financial strategy. Inflation also erodes the purchasing power of future dollars, making future mortgage payments potentially "cheaper" in real terms.
Taxes and Insurance (Escrow): This calculator typically focuses on Principal and Interest (P&I). Your actual monthly mortgage payment often includes escrow for property taxes and homeowner's insurance. Extra payments usually only reduce the P&I portion, not the escrow amount, though recalculations might occur annually based on tax/insurance changes.
Frequently Asked Questions (FAQ)
Q1: How do I ensure my extra payment goes to the principal?
A: Contact your mortgage lender directly. Ask them to specify how extra payments are applied. You can often request this via an online portal, phone call, or by clearly noting "Principal Only" on your payment check or in the memo line of an electronic payment.
Q2: What happens if I miss a regular payment but made an extra one?
A: A missed regular payment is a serious issue that incurs late fees and damages your credit score. Extra payments are applied *after* the required principal and interest payment. Always ensure your regular payment is made on time.
Q3: Can I use this calculator for an adjustable-rate mortgage (ARM)?
A: This calculator is primarily designed for fixed-rate mortgages. ARMs have interest rates that change periodically, making future payments unpredictable. While you can input current figures, the long-term savings projections might not be accurate due to rate fluctuations.
Q4: Does making extra payments affect my credit score?
A: Paying down your mortgage faster can positively impact your credit utilization ratio if you have other debts, and demonstrates responsible financial behavior. However, the primary effect is saving interest and shortening the loan term, not directly boosting your score like managing credit cards.
Q5: What if my extra payment is a large lump sum instead of monthly?
A: The principle is the same – the lump sum reduces the principal. The impact on interest savings and payoff time will depend on the size of the lump sum and when it's applied. You can simulate this by dividing the lump sum by the number of months remaining in the loan term and entering that as an average extra monthly payment, or by recalculating after making the lump sum payment.
Q6: Are there any tax implications for paying off my mortgage early?
A: Mortgage interest paid is typically tax-deductible up to certain limits. By paying off your mortgage early and reducing the total interest paid, you may reduce your potential mortgage interest tax deduction in later years. Consult a tax advisor for specifics related to your situation.
Q7: How much difference does 1% make in interest rate savings?
A: A 1% difference in interest rate can save tens or even hundreds of thousands of dollars over the life of a typical mortgage. For example, on a $300,000 loan over 30 years, a 6% rate saves significantly more interest than a 7% rate. Extra payments amplify these savings.
Q8: What is PMI, and how do extra payments affect it?
A: Private Mortgage Insurance (PMI) is usually required if your down payment is less than 20%. Making extra payments can help you reach the 20% equity threshold faster, potentially allowing you to request the cancellation of PMI sooner. Check your loan terms for PMI cancellation policies.