Your amortization schedule — i.e. the mortgage payment schedule — is shown to the right. Use the scroll bar and buttons below to page through the schedule, 12 months at a time.
Please bookmark this page so you can go back here anytime.
You can CALCULATE HOW MUCH you can SAVE when you make additional monthly payments on your MORTGAGE!
What this calculator will do for you is it will tell you that if you desire to make additional principal payments every month on your mortgage, then you could pay the loan in shorter term and save thousands of dollars.
And we will demonstrate in this video tutorial exactly what that means.
Let us say that the amount that we are borrowing is $300,000, and we’re going to say that the annual interest, arbitrarily, is 6% and our loan has an initial term of 30 years. And what we would like to do is make a payment of an additional $300 a month on the mortgage. This will add $300 every month to our normal payment. Once we hit the calculate button, that will now tell us that our new monthly mortgage payment for principal and interest is $2,098.65
Let us see what happens if we start making that payment. We will click the Show More Information button, and this illustration will show us the 1st year and what happens with our payment, and how they are allocated.
The interest for the 1st month is $1,500.00, that’s the interest only on a $300,000 mortgage at 6%. And the principal paid is $598.65 which is the difference between the $1,500.00 and the $2,098.00. Bear in mind that we have an additional $300 in this figure of $598.65, so we are paying off our mortgage at a faster rate than we will have to if we were just making the minimum required payment.
Let us see what the effect of this is, let us click forward and see at which point this mortgages is fully paid off. We are just going to click and forward through all the years till we get to the payoff of the loan. Now our loan will be paid off at the end of 21 years. Look at the last line in the schedule below:
We have made 252 payments and our balance is 0. So let us see what our savings is. We are making an additional payment of $300 a month for 252 months. If you multiply the 252 by $300, we would pay over this 21 years an additional $75,600. That is $75,600 more than we are required to pay had we been making the normal minimum required monthly payment. That is how much we spent extra.
Our loan was initially a 30 year loan, that is 360 months. Our loan has been paid off in 252 months which means we reduce the term of our loan by 108 months. And our required minimum monthly payment would have been $1,798.65 because that is $2,098.65 less the additional $300.
So what would we have been paying throughout the full term of the loan had we not prepaid the mortgage at all? The additional 108 monthly payments at $1,798.65 and that totals $194,254. That’s what we would have paid throughout the duration of the loan. And that’s what we save by making these extra monthly payments.
So to determine our net savings, we would take the $194,254 that we should have paid – that’s our savings, and we deduct from that the $75,600 that we paid extra over this time period of 252 months. And that would net us a savings of $118,654 and that is how much interest we saved over the entire term of this loan by making an additional $300 a month extra payment. So you can see it always pays if you can afford it to make an extra monthly payment.
Now one thing that you should be aware of, we selected an arbitrary number of $300 and we said we are going to make that amount of extra payment every month.
But you’re not bound to do that!
If you could only afford $50 a month, you can make your extra payment $50 a month… Let’s say in a month you have some extra money, maybe you’ve got an income tax refund, add in that month any amount you wish of additional principal. You are not bound to pay in the exact same amount every month!
But bear in mind that whatever you pay additional principal will help reduce your outstanding mortgage balance which will in turn reduce the interest due in your next month’s payment.
So it comes out that the wise move if you can afford to do it is to always attempt to prepay your mortgage, you will save thousands of dollars! over the long term of your loan.