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Mortgage Calculator With Extra Payments Nerd

Mortgage Balance Formula:

\[ B_k = B_{k-1} \times (1 + r) - (M + E) \]

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1. What is a Mortgage Calculator With Extra Payments?

Definition: This calculator shows how extra payments affect your mortgage balance by calculating the new balance after each payment period.

Purpose: It helps homeowners understand how additional payments can reduce their loan term and total interest paid.

2. How Does the Calculator Work?

The calculator uses the formula:

\[ B_k = B_{k-1} \times (1 + r) - (M + E) \]

Where:

Explanation: The formula calculates the new balance 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 current loan balance, annual interest rate (as decimal), regular monthly payment, and any extra payment amount. All values must be ≥ 0.

5. Frequently Asked Questions (FAQ)

Q1: How do extra payments affect my mortgage?
A: Extra payments reduce your principal faster, which decreases total interest paid and may shorten your loan term.

Q2: Should I specify extra payments as monthly or one-time?
A: This calculator assumes recurring monthly extra payments. For one-time payments, use a different tool.

Q3: What's the best strategy for extra payments?
A: Making extra payments early in the loan term has the greatest impact on reducing total interest.

Q4: 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).

Q5: Does this account for changing interest rates?
A: No, this assumes a fixed interest rate. For adjustable-rate mortgages, use a more advanced calculator.

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