Paying Extra On Mortgage Principal Calculator

Reduced Payments Formula:

\[ n' = \frac{-\log\left(1 - \frac{P \times r}{M + E}\right)}{\log(1 + r)} \]

Principal (P):

USD

Interest Rate (r):

decimal

Monthly Payment (M):

USD

Extra Payment (E):

USD

Reduced Payments (n'):

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1. What is the Paying Extra On Mortgage Principal Calculator?

Definition: This calculator determines how making extra principal payments reduces the total number of payments needed to pay off a mortgage.

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

2. How Does the Calculator Work?

The calculator uses the formula:

\[ n' = \frac{-\log\left(1 - \frac{P \times r}{M + E}\right)}{\log(1 + r)} \]

Where:

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

Explanation: The formula calculates how the additional payments reduce the loan term by decreasing the principal faster.

3. Importance of Extra Principal Payments

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

4. Using the Calculator

Tips: Enter the principal amount, interest rate (as decimal), regular monthly payment, and any extra principal payment you plan to make.

5. Frequently Asked Questions (FAQ)

Q1: How much can extra payments shorten my mortgage?
A: Even small additional payments can reduce your term by several years, depending on your loan details.

Q2: Should I specify that extra payments go toward principal?
A: Yes, always specify "principal only" to ensure the payment reduces your loan balance.

Q3: Is it better to make extra payments or refinance?
A: Depends on your rate and fees - this calculator helps compare options by showing term reduction.

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: Can I use this for other loans?
A: Yes, it works for any amortizing loan (car loans, personal loans, etc.).