Making extra payments on your mortgage, even small amounts consistently, can significantly impact the life of your loan and the total interest paid. An early payment mortgage calculator helps you visualize these benefits by estimating how much you can save in interest and how much faster you can pay off your home by making additional principal payments.
How Does it Work?
Mortgage payments are typically structured so that in the early years, a larger portion of your payment goes towards interest, and a smaller portion goes towards the principal balance. When you make an extra payment, especially if it's designated towards the principal, you are directly reducing the amount of money on which future interest is calculated. This has a compounding effect over time.
The Math Behind the Savings
The calculator uses loan amortization principles to estimate the impact of extra payments. Here's a simplified breakdown of the calculation:
Calculate Original Monthly Payment: First, the calculator determines your original monthly payment using the standard mortgage payment formula:
$M = P \left[ \frac{i(1+i)^n}{(1+i)^n – 1} \right]$
Where:
$M$ = Monthly Payment
$P$ = Principal Loan Amount
$i$ = Monthly Interest Rate (Annual Rate / 12)
$n$ = Total Number of Payments (Loan Term in Years * 12)
Calculate Total Interest Paid (Without Extra Payments): Using the original loan amount, interest rate, and term, the total interest paid over the life of the loan is calculated.
Calculate New Amortization Schedule (With Extra Payments): The calculator then simulates the loan's amortization, but with the added extra payment applied to the principal each period. This reduces the outstanding balance faster.
Calculate Total Interest Paid (With Extra Payments): The total interest paid is recalculated based on the accelerated payoff schedule.
Calculate Savings: The difference between the total interest paid without extra payments and the total interest paid with extra payments is the estimated interest savings. The reduction in the loan term is also calculated.
Key Input Parameters:
Current Loan Balance: The amount you currently owe on your mortgage.
Annual Interest Rate: The yearly interest rate of your mortgage.
Remaining Loan Term: The number of years left until your mortgage is fully paid off under the original schedule.
Extra Payment Amount: The additional amount you plan to pay towards the principal each payment cycle.
Payment Frequency: How often you make your regular mortgage payments (monthly, bi-weekly, weekly). This affects how many extra payments you can make per year.
Benefits of Early Mortgage Payments:
Reduced Total Interest Paid: The most significant financial benefit. Saving thousands on interest can be substantial over a 15, 20, or 30-year loan.
Shorter Loan Term: Paying off your mortgage faster means achieving homeownership freedom sooner.
Increased Equity: More of your payment goes towards equity, building your net worth faster.
Financial Flexibility: A paid-off home provides significant financial security and flexibility for future life events.
When to Use This Calculator:
You are considering making additional payments to pay down your mortgage faster.
You want to understand the potential savings from slightly increasing your regular payment.
You're exploring different payment strategies, like bi-weekly payments.
You want to visualize the long-term impact of financial discipline on your mortgage.
Use this calculator to estimate your potential savings and the impact on your loan term. Remember that while this calculator provides an excellent estimate, actual savings may vary slightly due to how your lender applies extra payments (ensure they are applied to the principal) and any potential prepayment penalties (though these are rare for residential mortgages in many regions).
function calculateEarlyPayment() {
var loanAmount = parseFloat(document.getElementById("loanAmount").value);
var annualInterestRate = parseFloat(document.getElementById("interestRate").value);
var remainingTermYears = parseFloat(document.getElementById("remainingTerm").value);
var extraPayment = parseFloat(document.getElementById("extraPayment").value);
var paymentFrequency = parseInt(document.getElementById("paymentFrequency").value);
var resultElement = document.getElementById("result");
var resultTextElement = document.getElementById("result-text");
if (isNaN(loanAmount) || isNaN(annualInterestRate) || isNaN(remainingTermYears) || isNaN(extraPayment) || isNaN(paymentFrequency) ||
loanAmount <= 0 || annualInterestRate < 0 || remainingTermYears <= 0 || extraPayment < 0 || paymentFrequency 0) {
originalMonthlyPayment = loanAmount * (monthlyInterestRate * Math.pow(1 + monthlyInterestRate, numberOfPayments)) / (Math.pow(1 + monthlyInterestRate, numberOfPayments) – 1);
} else {
originalMonthlyPayment = loanAmount / numberOfPayments;
}
// Calculate total interest paid without extra payments
var totalInterestWithoutExtra = (originalMonthlyPayment * numberOfPayments) – loanAmount;
// Simulate loan with extra payments
var currentBalance = loanAmount;
var totalPaidWithExtra = 0;
var totalInterestWithExtra = 0;
var paymentsMade = 0;
while (currentBalance > 0) {
var paymentAmount = originalMonthlyPayment;
var principalPaidThisPeriod = 0;
var interestPaidThisPeriod = 0;
if (monthlyInterestRate > 0) {
interestPaidThisPeriod = currentBalance * monthlyInterestRate;
} else {
interestPaidThisPeriod = 0; // If rate is 0, no interest is paid
}
principalPaidThisPeriod = paymentAmount – interestPaidThisPeriod;
// Add extra payment to principal reduction
principalPaidThisPeriod += extraPayment;
// Ensure we don't pay more than the remaining balance
if (principalPaidThisPeriod > currentBalance) {
principalPaidThisPeriod = currentBalance;
interestPaidThisPeriod = 0; // No interest if balance is cleared
paymentAmount = principalPaidThisPeriod; // Final payment is just the remaining balance
} else {
paymentAmount = principalPaidThisPeriod + interestPaidThisPeriod;
}
currentBalance -= principalPaidThisPeriod;
totalPaidWithExtra += paymentAmount;
totalInterestWithExtra += interestPaidThisPeriod;
paymentsMade++;
// Prevent infinite loops in edge cases (e.g., extremely low rates or payments)
if (paymentsMade > numberOfPayments * 5) {
console.error("Potential infinite loop detected. Calculation aborted.");
resultElement.textContent = "Error";
resultTextElement.textContent = "Calculation could not be completed due to complexity or invalid inputs.";
return;
}
}
var actualRemainingTermYears = (paymentsMade / paymentFrequency); // This assumes original payments align with frequency, which is usually not the case, so we report total years saved.
// Calculate term saved more accurately
// Re-calculate original total interest assuming monthly payments for baseline comparison
var monthlyInterestRate_baseline = annualInterestRate / 100 / 12;
var numberOfPayments_baseline = remainingTermYears * 12;
var originalMonthlyPayment_baseline = 0;
if (monthlyInterestRate_baseline > 0) {
originalMonthlyPayment_baseline = loanAmount * (monthlyInterestRate_baseline * Math.pow(1 + monthlyInterestRate_baseline, numberOfPayments_baseline)) / (Math.pow(1 + monthlyInterestRate_baseline, numberOfPayments_baseline) – 1);
} else {
originalMonthlyPayment_baseline = loanAmount / numberOfPayments_baseline;
}
var totalInterestPaid_baseline = (originalMonthlyPayment_baseline * numberOfPayments_baseline) – loanAmount;
// Re-simulate with original terms to find original number of payments made
var currentBalance_baseline = loanAmount;
var paymentsMade_baseline = 0;
while (currentBalance_baseline > 0) {
var paymentAmount_baseline = originalMonthlyPayment_baseline;
var interestPaidThisPeriod_baseline = 0;
var principalPaidThisPeriod_baseline = 0;
if (monthlyInterestRate_baseline > 0) {
interestPaidThisPeriod_baseline = currentBalance_baseline * monthlyInterestRate_baseline;
}
principalPaidThisPeriod_baseline = paymentAmount_baseline – interestPaidThisPeriod_baseline;
// Handle the last payment which might be smaller
if (principalPaidThisPeriod_baseline > currentBalance_baseline) {
principalPaidThisPeriod_baseline = currentBalance_baseline;
interestPaidThisPeriod_baseline = 0;
}
currentBalance_baseline -= principalPaidThisPeriod_baseline;
paymentsMade_baseline++;
if (paymentsMade_baseline > numberOfPayments_baseline * 2) { // Safety break
console.error("Baseline calculation loop error.");
break;
}
}
var originalTermInYears = paymentsMade_baseline / 12;
// Calculate term saved using the paymentsMade from the extra payment simulation
var totalPaymentsMadeWithExtra = paymentsMade;
var termSaved = originalTermInYears – (totalPaymentsMadeWithExtra / paymentFrequency);
var yearsSaved = Math.max(0, termSaved); // Ensure savings are not negative
var interestSavings = totalInterestPaid_baseline – totalInterestWithExtra;
resultElement.textContent = "$" + interestSavings.toFixed(2);
resultTextElement.textContent = "By paying an extra $" + extraPayment.toFixed(2) + " per payment period, you could save approximately $" + interestSavings.toFixed(2) + " in interest and pay off your mortgage about " + yearsSaved.toFixed(1) + " years sooner!";
}