|Do this calculation FIRST - as if you're NOT making extra payments.|
Paying down the principal on your loan more quickly will never reduce the minimum monthly payment or allow you to skip a payment.
- Most loans (mortgage and other) in the United States compound interest monthly.
- Mortgage loans in Canada compound interest semi-annually.
- If you want to calculate how much a mortgage payment will be on a $200,000 mortgage at 4.25% interest for 360 months, you would enter:
Now, let's say you would like to make extra monthly principal payments of $116.12 (to round the payment to $1100) for the next 10 years starting in June of 2015. You'll enter:
- 200,000 for Loan Amount
- 360 for Months
- 4.25 for Interest Rate (Compounded Monthly)
- Press the Payment button, and you'll see that your payment would be $983.88. You will pay about $154,196.69 in interest over the life of this loan. Make sure that the month and year of your first payment is reflected in the first payment due field (in this case -June 2015).
- Monthly for how often extra principal payments will be made.
- 116.12 for the extra payment amount
- Select June and 2015 as the first extra payment date
- Select June and 2025 as the date to which the payment will be made. (May will be the last extra payment.)
- Press the View Amortization Schedule button, and you'll see that your mortgage will be paid in 322 months (instead of 360 months) and you'll pay about $130,279.28 in interest (instead of $154,196.69).
- In this next example, let's say you took out a 30 year (360 months), $200,000 mortgage in May of 1996 (first payment due June 1996) at 7.5% interest. Your required payments are $1398.43, yet you have been making monthly payments of $1500 (which you intend to continue) with the excess going to principal. Recently, you have received an inheritance and have decided to apply an additional $25,000 to your mortgage principal in Jan 2014. When will the mortgage be paid in full?
- 200,000 for the Loan Amount
- Leave the Months field blank
- 7.5 for Interest Rate (Compounded Monthly)
- 1500 for Payment
- Select May 1996 for when the first payment was due.
- Press the Months button, and you'll see that you'll pay $1500 for 287.58 months before your mortgage will be paid in full. You'll pay about $231,365.95 in interest over the life of this loan.
- Select One Time Only
- 25000 extra payment
- Select Jan and 2014 for when you'll make the extra payment
- Just change this field to any YEAR AFTER the One Time Only payment will be made.
- Now, press the View Amortization Schedule button. You'll see that your mortgage will be paid in just 263 months (instead of 288 months) and you'll pay just $219,436.93 interest (instead of $231,365.95). You'll make your final mortgage payment in March of 2018! - YEAH!!!
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