A mortgage is a significant financial commitment, typically the largest loan most people will ever take out. Understanding how it works, and how you can potentially pay it off faster and save money, is crucial for financial well-being. This calculator helps visualize the impact of making extra payments on your mortgage, a strategy often referred to as "accelerated debt payoff."
How a Standard Mortgage Works
A standard mortgage payment consists of two main components: principal and interest. Over the life of the loan, your payments are structured so that in the early years, a larger portion goes towards interest, and a smaller portion towards the principal. As you get closer to the end of your loan term, this ratio shifts, with more of your payment going towards the principal.
The formula for calculating a fixed monthly mortgage payment (P&I) is:
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]
Where:
M = Your total monthly mortgage payment (Principal & Interest)
P = The principal loan amount
i = Your monthly interest rate (annual rate divided by 12)
n = The total number of payments over the loan's lifetime (loan term in years multiplied by 12)
The Power of Extra Payments
Making extra payments, whether it's a small amount each month or a larger lump sum, directly reduces your loan's principal balance. Since interest is calculated on the outstanding principal, reducing the principal faster means you pay less interest over the life of the loan. This can have a dramatic effect:
Shorter Loan Term: By consistently paying down the principal faster, you can shave years off your mortgage, becoming debt-free sooner.
Significant Interest Savings: The cumulative effect of paying less interest over a shorter period can amount to tens or even hundreds of thousands of dollars saved, depending on the loan amount and interest rate.
How the Calculator Works
This calculator takes your standard mortgage details (loan amount, interest rate, term) and adds your specified extra monthly payment. It then recalculates the amortization schedule to determine:
Total Interest Paid (Without Extra Payments): The total interest you would pay over the original loan term.
Total Interest Paid (With Extra Payments): The total interest you will pay with the additional monthly payments.
Total Savings: The difference between the two interest amounts.
Time Saved: The number of years and months by which you shorten your loan term.
The calculation involves simulating the loan's amortization month by month. For each month, the interest is calculated on the remaining balance, then the principal portion of the payment (standard payment + extra payment) is subtracted. This process repeats until the loan balance reaches zero.
When to Consider Extra Payments
Making extra payments is a smart strategy if you:
Have a stable income and budget.
Have built up an emergency fund.
Are looking to reduce long-term debt and interest costs.
Want to own your home outright sooner.
Important Note: Always ensure your extra payments are applied directly to the principal. Contact your lender to confirm how to properly designate extra payments to avoid them being applied to future installments.
function calculateMortgage() {
var principal = parseFloat(document.getElementById("loanAmount").value);
var annualInterestRate = parseFloat(document.getElementById("annualInterestRate").value);
var loanTermYears = parseInt(document.getElementById("loanTermYears").value);
var extraPaymentMonthly = parseFloat(document.getElementById("extraPaymentMonthly").value);
// Validate inputs
if (isNaN(principal) || principal <= 0 ||
isNaN(annualInterestRate) || annualInterestRate < 0 ||
isNaN(loanTermYears) || loanTermYears <= 0 ||
isNaN(extraPaymentMonthly) || extraPaymentMonthly 0) {
standardMonthlyPayment = principal * (monthlyInterestRate * Math.pow(1 + monthlyInterestRate, numberOfPayments)) / (Math.pow(1 + monthlyInterestRate, numberOfPayments) – 1);
} else {
standardMonthlyPayment = principal / numberOfPayments; // Handle 0% interest rate
}
// — Calculate without extra payments —
var totalInterestPaidStandard = 0;
var remainingBalanceStandard = principal;
var monthsToPayoffStandard = 0;
if (standardMonthlyPayment > 0) {
while (remainingBalanceStandard > 0) {
var interestForMonth = remainingBalanceStandard * monthlyInterestRate;
var principalForMonth = standardMonthlyPayment – interestForMonth;
if (principalForMonth > remainingBalanceStandard) {
principalForMonth = remainingBalanceStandard; // Adjust for final payment
standardMonthlyPayment = interestForMonth + principalForMonth;
}
totalInterestPaidStandard += interestForMonth;
remainingBalanceStandard -= principalForMonth;
monthsToPayoffStandard++;
if (monthsToPayoffStandard > numberOfPayments * 2) { // Safety break for potential infinite loops with odd inputs
alert("Calculation error: Standard payment might be too low. Please check inputs.");
return;
}
}
} else { // Handle cases where standard payment is zero or insufficient
totalInterestPaidStandard = 0; // Or handle as an error if principal > 0
monthsToPayoffStandard = numberOfPayments;
}
// — Calculate with extra payments —
var totalPaymentWithExtra = standardMonthlyPayment + extraPaymentMonthly;
var totalInterestPaidWithExtra = 0;
var remainingBalanceWithExtra = principal;
var monthsToPayoffWithExtra = 0;
var totalPrincipalPaidWithExtra = 0;
if (totalPaymentWithExtra > 0) {
while (remainingBalanceWithExtra > 0) {
var interestForMonth = remainingBalanceWithExtra * monthlyInterestRate;
var principalForMonth = totalPaymentWithExtra – interestForMonth;
if (principalForMonth > remainingBalanceWithExtra) {
principalForMonth = remainingBalanceWithExtra; // Adjust for final payment
totalPaymentWithExtra = interestForMonth + principalForMonth; // Actual final payment made
}
totalInterestPaidWithExtra += interestForMonth;
remainingBalanceWithExtra -= principalForMonth;
totalPrincipalPaidWithExtra += principalForMonth;
monthsToPayoffWithExtra++;
if (monthsToPayoffWithExtra > numberOfPayments * 2) { // Safety break
alert("Calculation error: Payment with extra might be too low or calculation is stuck. Please check inputs.");
return;
}
}
} else { // Handle cases where total payment is zero or insufficient
totalInterestPaidWithExtra = 0; // Or handle as error
monthsToPayoffWithExtra = numberOfPayments;
}
// Calculate savings and time saved
var totalSavings = totalInterestPaidStandard – totalInterestPaidWithExtra;
var monthsSaved = monthsToPayoffStandard – monthsToPayoffWithExtra;
// Format results
var formattedSavings = totalSavings.toLocaleString('en-US', { style: 'currency', currency: 'USD' });
var yearsSaved = Math.floor(monthsSaved / 12);
var remainingMonths = monthsSaved % 12;
var formattedTimeSaved = yearsSaved + " Years " + remainingMonths + " Months";
// Display results
document.getElementById("totalSavings").textContent = formattedSavings;
document.getElementById("timeSaved").textContent = formattedTimeSaved;
}
// Initial calculation on load if values are present
document.addEventListener('DOMContentLoaded', function() {
calculateMortgage();
});