1. What is a Mortgage Payment Calculator with Extra Pay?

Definition: This calculator shows how making extra payments affects your mortgage by calculating interest savings and reduced loan term.

Purpose: It helps homeowners understand the financial benefits of paying more than their required monthly mortgage payment.

2. How Does the Calculator Work?

The calculator uses the formula:

Where:

• \( B_k \) — Balance in month k (USD)
• \( r \) — Monthly interest rate (decimal)
• \( M \) — Regular monthly payment (USD)
• \( E \) — Extra payment amount (USD)

Explanation: Each month's balance is calculated by applying interest to the previous balance, then subtracting both the regular and extra payments.

3. Importance of Extra Payments

Details: Even small extra payments can significantly reduce total interest paid and shorten your loan term, potentially saving thousands of dollars.

4. Using the Calculator

Tips: Enter your loan amount, interest rate, loan term, and any extra payment you can make monthly. All values must be > 0 (except extra payment which can be 0).

5. Frequently Asked Questions (FAQ)

Q1: How much can I save with extra payments?
A: Savings depend on your loan details, but even $100 extra per month can save tens of thousands over a 30-year mortgage.

Q2: Should I pay extra principal or invest?
A: Compare your mortgage rate to potential investment returns. Paying extra 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 saves more interest since more of your payment goes toward interest initially.

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 actually make extra payments?
A: Contact your lender to ensure extra payments are applied to principal and specify this is your intention.