- Payments are made at the end of the month.
- 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:
- 200,000 for Principal Value
- 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. Your first payment will be due Jan 2014. Make sure that this date is reflected in the first payment due field.
Now, let's say you would like to make extra monthly principal payments of $116.12 (to round the payment to $1100) for 10 years starting in April of 2014. You'll enter:
- Monthly for how often extra principal payments will be made.
- 116.12 for the extra payment amount
- Select Apr and 2014 as the first extra payment date
- Select Apr and 2024 as the date the payment will be made to. (March 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 $130,652.54 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 Principal Value
- Leave the Months field blank
- 7.5 for Interest Rate (Compounded Monthly)
- 1500 for Payment
- 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
- You don't have to change this field at all since you've already selected when 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 $219,223.55 interest (instead of $231,365.95). So, you'll make your final mortgage payment in April of 2018! YEAH!!!
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