1. What is a Mortgage Calculator with Extra Payments?

Definition: This calculator determines how extra payments affect your mortgage payoff time and total interest paid.

Purpose: It helps homeowners understand the impact of making additional payments toward their mortgage principal.

2. How Does the Calculator Work?

The calculator uses the recursive formula:

Where:

• \( B_k \) — Balance after month k (USD)
• \( r \) — Monthly interest rate (decimal)
• \( M \) — Regular monthly payment (USD)
• \( E \) — Extra payment (USD)
• \( P \) — Initial principal (USD)

Explanation: Each month's balance is calculated by applying interest to the previous balance, then subtracting 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 the principal balance.

4. Using the Calculator

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

5. Frequently Asked Questions (FAQ)

Q1: How much can extra payments save me?
A: Depending on your loan terms, even $100 extra per month can save thousands in interest and cut years off your mortgage.

Q2: Should I pay extra toward principal or invest?
A: Compare your mortgage rate to potential investment returns. Paying down debt is a guaranteed return equal to your interest rate.

Q3: When is the best time to make extra payments?
A: Earlier in the loan term has the greatest impact, as more of your payment goes toward interest in the early years.

Q4: Are there prepayment penalties?
A: Most modern mortgages don't have them, but check your loan terms to be sure.

Q5: How do I set up extra payments?
A: Contact your lender to ensure extra payments are applied to principal (not future payments) and confirm their process.