Making additional payments on your mortgage can be a powerful strategy to reduce the total interest paid over the life of your loan and shorten the repayment period. This calculator helps you visualize the financial benefits of paying more than your required monthly installment.
How it Works: The Math Behind the Savings
When you make an additional payment towards your mortgage principal, it directly reduces the outstanding balance. Since interest is calculated on the remaining principal, a lower balance means less interest accrues in the subsequent periods. This snowball effect can lead to significant savings over time.
Key Calculations:
Original Loan Amortization: First, we calculate the standard monthly payment (P&I) for your loan using the formula:
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]
Where:
M = Monthly Payment
P = Principal Loan Amount
i = Monthly Interest Rate (Annual Rate / 12)
n = Total Number of Payments (Remaining Term in Years * 12)
New Loan Amortization (with additional payments): The calculator then simulates the loan's amortization schedule by incorporating your additional payments. Each extra payment reduces the principal balance, which in turn reduces the interest calculated for the next period.
Total Interest Saved: This is the difference between the total interest you would have paid on the original amortization schedule and the total interest paid with the additional payments applied.
New Payoff Time: The calculator determines how many months (or years) earlier you will pay off your mortgage due to the accelerated principal reduction.
Why Make Additional Payments?
Save Money: Even small, consistent additional payments can save you thousands of dollars in interest over the life of the loan.
Build Equity Faster: You'll own your home outright sooner, increasing your net worth and financial freedom.
Financial Flexibility: Paying off your mortgage early can free up your cash flow for other financial goals, such as retirement savings, investments, or travel.
Peace of Mind: Eliminating your largest debt can provide significant psychological relief and financial security.
Important Considerations:
Loan Principal vs. Interest: Ensure your extra payments are clearly designated towards the principal. Contact your lender to confirm how they apply additional payments.
Escrow: This calculator typically focuses on principal and interest (P&I). If your payment includes escrow for taxes and insurance, ensure your additional payments don't inadvertently cover these if you intend them solely for principal reduction.
Prepayment Penalties: Most standard mortgages do not have prepayment penalties, but it's crucial to review your loan documents to confirm.
Emergency Fund: Before making significant extra payments, ensure you have a robust emergency fund in place.
By understanding the impact of additional payments, you can make informed decisions to optimize your mortgage repayment strategy and achieve your financial goals faster.
function calculateMortgage() {
var loanAmount = parseFloat(document.getElementById("loanAmount").value);
var interestRate = parseFloat(document.getElementById("interestRate").value);
var remainingTermYears = parseFloat(document.getElementById("remainingTerm").value);
var additionalPayment = parseFloat(document.getElementById("additionalPayment").value);
var frequency = parseInt(document.getElementById("frequency").value);
var resultDiv = document.getElementById("result");
var totalInterestSavedSpan = document.getElementById("totalInterestSaved");
var newPayoffTimeSpan = document.getElementById("newPayoffTime");
// Clear previous results and hide if inputs are invalid
resultDiv.style.display = 'none';
totalInterestSavedSpan.textContent = ";
newPayoffTimeSpan.textContent = ";
if (isNaN(loanAmount) || isNaN(interestRate) || isNaN(remainingTermYears) || isNaN(additionalPayment) || isNaN(frequency) ||
loanAmount <= 0 || interestRate < 0 || remainingTermYears <= 0 || additionalPayment < 0 || frequency 0) {
originalMonthlyPayment = loanAmount * (monthlyInterestRate * Math.pow(1 + monthlyInterestRate, numberOfPayments)) / (Math.pow(1 + monthlyInterestRate, numberOfPayments) – 1);
} else {
originalMonthlyPayment = loanAmount / numberOfPayments; // Simple division if interest is 0
}
var totalInterestOriginal = (originalMonthlyPayment * numberOfPayments) – loanAmount;
var currentBalance = loanAmount;
var totalInterestPaidWithExtra = 0;
var monthsPaid = 0;
var totalPaymentsMade = 0; // Keep track of total payments for averaging
var extraPaymentPerPeriod = additionalPayment / (12 / frequency); // Convert additional payment to per-period amount
// Amortization loop with additional payments
while (currentBalance > 0) {
var interestForPeriod = currentBalance * monthlyInterestRate;
var principalForPeriod = originalMonthlyPayment – interestForPeriod; // Base principal payment
var actualPaymentThisPeriod = originalMonthlyPayment;
// Apply additional payment, ensuring not to overpay
var amountAppliedToPrincipal = principalForPeriod + extraPaymentPerPeriod;
if (currentBalance – amountAppliedToPrincipal (remainingTermYears * 12 * 5)) { // Arbitrary limit: 5x original term
alert("Calculation exceeded maximum iterations. Please check your input values.");
return;
}
}
var interestSaved = totalInterestOriginal – totalInterestPaidWithExtra;
var newPayoffYears = Math.floor(monthsPaid / 12);
var newPayoffMonths = monthsPaid % 12;
totalInterestSavedSpan.textContent = '$' + interestSaved.toFixed(2);
var payoffTimeString = ";
if (newPayoffYears > 0) {
payoffTimeString += newPayoffYears + ' year(s)';
if (newPayoffMonths > 0) {
payoffTimeString += ', ';
}
}
if (newPayoffMonths > 0 || monthsPaid < (remainingTermYears * 12)) { // Show months if they exist or if payoff is shorter than original
payoffTimeString += newPayoffMonths + ' month(s)';
} else if (monthsPaid === (remainingTermYears * 12)) {
payoffTimeString = 'Same as original';
}
newPayoffTimeSpan.textContent = payoffTimeString;
resultDiv.style.display = 'block';
}