Understanding the Power of Extra Mortgage Payments
Making extra payments on your mortgage can be one of the most effective ways to build equity faster, save a substantial amount on interest over the life of your loan, and achieve financial freedom sooner. This calculator helps you visualize the impact of adding extra payments to your regular mortgage installments.
How it Works: The Math Behind the Savings
When you make a mortgage payment, it's typically divided between principal and interest. By paying more than your scheduled amount, you directly reduce your loan's principal balance. Since interest is calculated on the remaining principal, reducing it faster means less interest accrues over time. This snowball effect can significantly shorten your loan term and reduce the total interest paid.
The calculator uses the following logic:
Calculate Original Monthly Payment: First, it determines your original monthly payment based on the current loan balance, interest rate, and remaining term using the standard mortgage payment formula (amortization formula).
Calculate Total Payments Without Extra: It then projects the total number of payments and total interest paid if you only make the standard monthly payment.
Calculate Payments With Extra: For each extra payment period (monthly, bi-weekly, or weekly), it simulates making the regular payment plus the extra amount. Each extra payment directly reduces the principal.
Determine New Loan Term and Interest Savings: The calculator iterates through the loan amortization schedule, factoring in the extra payments, to find out how many months it will take to pay off the loan with the additional contributions. It then calculates the total interest saved compared to the original loan term.
Key Inputs Explained:
Current Loan Balance: The outstanding amount you currently owe on your mortgage.
Annual Interest Rate: The yearly interest rate on your mortgage.
Remaining Loan Term (Years): The number of years left until your mortgage is fully paid off.
Extra Monthly Payment: The additional amount you plan to pay each month above your regular mortgage installment.
Payment Frequency: How often you will make your regular mortgage payments (monthly, bi-weekly, or weekly). This impacts how quickly your extra payments are applied to the principal. For bi-weekly and weekly, the calculator assumes that you are essentially making one extra *monthly* payment per year (or slightly more) due to the way payments align. For instance, making a payment every two weeks results in 26 half-payments annually, totaling 13 full monthly payments.
Why Make Extra Payments?
Save on Interest: The most significant benefit. Even small extra payments can save tens of thousands of dollars over decades.
Pay Off Your Mortgage Faster: Become mortgage-free years, or even a decade or more, ahead of schedule.
Build Equity Quickly: More of your money goes towards ownership rather than interest.
Financial Freedom: Achieving mortgage freedom provides immense financial flexibility and peace of mind.
Use this calculator to experiment with different extra payment amounts and strategies to see how quickly you can achieve your mortgage payoff goals and how much interest you can save!
function calculateExtraPayments() {
var principal = parseFloat(document.getElementById('principal').value);
var annualInterestRate = parseFloat(document.getElementById('interestRate').value);
var remainingTermYears = parseFloat(document.getElementById('remainingTermMonths').value);
var extraPaymentAmount = parseFloat(document.getElementById('extraPaymentAmount').value);
var paymentFrequency = parseInt(document.getElementById('paymentFrequency').value);
var resultDiv = document.getElementById('result');
resultDiv.innerHTML = "; // Clear previous results
if (isNaN(principal) || principal <= 0 ||
isNaN(annualInterestRate) || annualInterestRate < 0 ||
isNaN(remainingTermYears) || remainingTermYears <= 0 ||
isNaN(extraPaymentAmount) || extraPaymentAmount < 0 ||
isNaN(paymentFrequency) || paymentFrequency 0) {
originalMonthlyPayment = principal * (monthlyInterestRate * Math.pow(1 + monthlyInterestRate, remainingTermMonths)) / (Math.pow(1 + monthlyInterestRate, remainingTermMonths) – 1);
} else {
originalMonthlyPayment = principal / remainingTermMonths; // If interest rate is 0
}
// Calculate total payments and total interest without extra payments
var totalPaymentsWithoutExtra = remainingTermMonths;
var totalInterestWithoutExtra = (originalMonthlyPayment * remainingTermMonths) – principal;
// Simulate with extra payments
var currentBalance = principal;
var monthsPaid = 0;
var totalPaidWithExtra = 0;
var totalInterestPaidWithExtra = 0;
// Adjust extra payment based on frequency.
// If bi-weekly, it's 26 half-payments = 13 full payments. Effectively 1 extra monthly payment.
// If weekly, it's 52 quarter-payments = 13 full payments. Effectively 1 extra monthly payment.
// So, for simplicity, we add the extra amount directly each month and simulate a 'monthly' payment schedule for calculation,
// but the *frequency* impacts the total amount paid per year, which is more nuanced.
// A more accurate simulation would be to calculate the total amount paid per year.
// For this calculator, we will simulate by adding the `extraPaymentAmount` to the *standard monthly payment*
// and applying it monthly, which is a common way people conceptualize paying extra.
// If the user selects bi-weekly/weekly, we can inform them that this method is simplified.
var effectiveExtraMonthlyPayment = extraPaymentAmount;
var totalMonthlyPayment = originalMonthlyPayment + effectiveExtraMonthlyPayment;
var tempBalance = principal;
var tempMonths = 0;
while (tempBalance > 0) {
tempMonths++;
var interestPayment = tempBalance * monthlyInterestRate;
var principalPayment = totalMonthlyPayment – interestPayment;
if (principalPayment > tempBalance) {
principalPayment = tempBalance;
totalMonthlyPayment = interestPayment + principalPayment; // Adjust the last payment
}
tempBalance -= principalPayment;
totalPaidWithExtra += totalMonthlyPayment;
if (tempMonths > 10000) { // Prevent infinite loops for edge cases
resultDiv.innerHTML = "Calculation could not be completed. Please check your inputs.";
return;
}
}
var newRemainingTermMonths = tempMonths;
var totalInterestPaidWithExtra = totalPaidWithExtra – principal;
var interestSaved = totalInterestWithoutExtra – totalInterestPaidWithExtra;
var timeSavedYears = remainingTermYears – (newRemainingTermMonths / 12);
var originalTotalCost = principal + totalInterestWithoutExtra;
var newTotalCost = principal + totalInterestPaidWithExtra;
resultDiv.innerHTML = `
Original Loan Term: ${remainingTermYears.toFixed(1)} years (${remainingTermMonths} months)
Original Monthly Payment: $${originalMonthlyPayment.toFixed(2)}
Total Interest Paid (Original): $${totalInterestWithoutExtra.toFixed(2)}
Total Paid (Original): $${originalTotalCost.toFixed(2)}
New Loan Term with Extra Payments: ${(newRemainingTermMonths / 12).toFixed(1)} years (${newRemainingTermMonths} months)
New Total Monthly Payment (approx): $${totalMonthlyPayment.toFixed(2)}
Total Interest Paid (With Extra): $${totalInterestPaidWithExtra.toFixed(2)}
Total Paid (With Extra): $${newTotalCost.toFixed(2)}
Interest Saved: $${interestSaved.toFixed(2)}
Time Saved: ${timeSavedYears.toFixed(1)} years
`;
}