1. What is a Home Loan Payoff Calculator with Extra Payments?

Definition: This calculator determines how much faster you can pay off your home loan by making extra payments.

Purpose: It helps homeowners understand the impact of additional payments on their loan term and total interest paid.

2. How Does the Calculator Work?

The calculator uses the formula:

Where:

• \( n' \) — Reduced number of payments (unitless)
• \( P \) — Loan principal (USD)
• \( r \) — Monthly interest rate (decimal)
• \( M \) — Regular monthly payment (USD)
• \( E \) — Extra monthly payment (USD)

Explanation: The formula calculates how many payments would be needed to pay off the loan when making additional payments each month.

3. Importance of Extra Payments Calculation

Details: Making extra payments can significantly reduce the loan term and total interest paid, potentially saving thousands of dollars.

4. Using the Calculator

Tips: Enter your loan principal, interest rate (as decimal), regular payment, and any extra payment you plan to make. All values must be ≥ 0.

5. Frequently Asked Questions (FAQ)

Q1: How do I convert APR to monthly rate?
A: Divide your annual rate by 12 (for months). Example: 6% APR = 0.06/12 = 0.005 monthly rate.

Q2: Should I apply extra to principal or regular payment?
A: Always specify extra payments should go toward principal to maximize interest savings.

Q3: How much can extra payments save me?
A: Even small extra payments can save thousands and cut years off your loan. $100 extra/month on a $200k loan can save ~$30k and 5+ years.

Q4: Is it better to make lump sum or regular extra payments?
A: Regular extra payments provide consistent interest savings, but any extra helps. Do what fits your budget.

Q5: Does this account for changing interest rates?
A: No, this assumes a fixed-rate loan. For adjustable rates, calculations would need to be updated when rates change.