1. What is a Mortgage Extra Payment Calculator?

Definition: This calculator shows how making extra payments affects your mortgage balance over time.

Purpose: It helps homeowners understand the impact of additional payments on their loan payoff timeline and interest savings.

2. How Does the Calculator Work?

The calculator uses the formula:

Where:

• \( B_k \) — Balance in month k (USD)
• \( B_{k-1} \) — Previous month's balance (USD)
• \( r \) — Monthly interest rate (decimal)
• \( M \) — Regular monthly payment (USD)
• \( E \) — Extra payment amount (USD)

Explanation: Each month's balance grows by the interest amount, then decreases by both the regular payment and any extra payment.

3. Importance of Extra Payments

Details: Even small extra payments can significantly reduce your loan term and total interest paid by directly reducing principal.

4. Using the Calculator

Tips: Enter your current loan balance, monthly interest rate (annual rate ÷ 12), regular payment, extra payment amount (0 for none), and how many months to project.

5. Frequently Asked Questions (FAQ)

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

Q2: Should I apply extra to principal or next payment?
A: Specify "principal only" payments to maximize interest savings.

Q3: How much will extra payments save me?
A: This calculator shows the balance reduction. For total savings, compare with no-extra-payment scenario.

Q4: Are there prepayment penalties?
A: Check your loan terms - most modern mortgages don't have them.

Q5: Is it better to pay extra monthly or lump sums?
A: Monthly extra payments provide consistent interest savings, but any extra helps.