Making Additional Home Loan Payments?
Accelerated Repayment Can Save You Money!
Shave years off your loan and save money by paying more than your regularly scheduled amount. How much money can you save? Find out now. Fill out this calculator, including the additional amount and the number of times you will make that increased contribution each year. The calculation results will show how much interest you save & how much quicker your loan will be paid off.Usage Instructions
Enter your original mortgage information along with your extra payments using the calculator below to see how much interest you will save and how much sooner your loan will be paid off in full. Click the following section for more information on how to enter a one-off extra payment or recurring extra payments.
For your convenience the following table lists how many times per year is associated with common extra payment frequencies. You can enter the associated frequency along with your payment amount in the recurring portion of the calculator below.
|Frequency||Extra Payments Per Year|
|Single / Lump Sum||Enter in one-time box|
If your additional payments are made more frequently than monthly, the amortization table will show those extra payments as being rolled into your monthly payments. A weekly, bimonthly or other extra payment will be automatically converted into the monthly equivalent amount. For example, $100 added every week would be converted to $433.33 per month & that amount will be added to each monthly payment. We formatted the output tables in this manner to make it easy to see the year-by-year progress in the loan amortization table. The summary table has the core principal & interest payment in large font, while the total monthly homeownership cost with other expenses like PMI, homeowners insurance, property taxes & HOA fees is listed beneath it.
- If you are making a lump sum extra payment enter the amount of the payment and the date of it in the calculator below.
- If you are not making recurring extra payments you can enter zeros in the recurring section & enter your extra payment details in the one-time extra payment section.
- If you are making recurring extra payments but no one-time payment then enter your details in the recurring section & set the one-time payment to zero.
- If you are making both recurring payments AND a one-time payment you can enter both in the calculator below, though make sure you select the correct dates for each.
You can calculate both recurring extra payments & an additional lump sum payment by entering the details for each in the calculator below. Find more detailed instructions for how to enter each type of payment in the associated sections above.
Another great way to save money is to lock-in historically low interest rates. Leading current mortgage rates are published beneath this calculator.
Save Money By Refinancing Your 4.5% APR 30-year $260,000.00 Home Loan Today
The following table highlights locally available current mortgage rates. By default 30-year refinance loans are displayed. Clicking on the purchase button switches loans to new home purchases. Other loan adjustment options including price, down payment, home location, credit score, term & ARM options are available for selection in the filters area at the top of the table.
Annual Amortization Schedule for Your $260,000 Home Loan With Extra Payments
Example table for a loan which began in November of 2017, with extra payments beginning 2 years later.
|Beginning Year||No Extra Payments||With Extra Payments|
When you first take out a loan, you're probably not thinking about paying it off early.
After all, you designed your payment schedule to suit your income and your lifestyle — so why mess with success?
Because things change, that's why. You were expecting your income to increase with time, but what if you get laid off, have an unforeseen promotion which requires relocating, a better offer from a different company, unexpected twins, or a windfall from selling off your collection of vintage ketchup packets on eBay — you never know what the future holds.
In these fast-paced times, it's sometimes difficult to predict your financial future for the next 30 days, let alone 3 decades.
Paying Extra On Your Monthly Mortgage Payments
Without a doubt, paying extra is a good thing. It helps you pay off your debt a lot sooner, and save you a bundle in interest — but is it right for your future plans, and how much more should you pay?
Let's say you get a sizable tax refund. Conventional wisdom says you should apply this toward paying off your home quicker, but your spouse may disagree. Oftentimes, an unexpected windfall can best be used for home improvements, which will help with your capital gains tax exemption down the road, or for home and auto repairs, which may be sorely needed.
Some say you shouldn't even waste time pondering what to do when you come into extra money and you should sent it straight to your lender. In any case, any additional funds you send them should be specified to be applied toward your principal.
If you don't specify, they might just apply your contribution toward your future scheduled monthlies. If that happens, you won't save a penny, but the bank will be pretty happy.
How Much Money Will You Save?
The short answer is, you will save a lot. In addition to having your home fully paid-off ahead of time (giving you buying power when you need it), you will have saved tens of thousands in interest costs.
Let's turn again to our trusty free online calculation tools to figure out how much time and money you'll save by paying off your home early. You can use the above calculator to show you exactly how much you'll save, to the penny, and even what you'll save in 5, 10, or 20 years from now.
Life has been good to you. Your company increased your salary, giving you about $200 more a month in disposable income. Your envious co-workers may be thinking, "Nice work if you can get it," but you're not going to splurge on frivolous things.
You're going to put that "found money" toward your debt. Well, not all of it, you still need some wiggle room. You've decided to increase your monthly repayment by $125 each month from now on.
First, make sure it's okay with your lender. Some lenders still penalize you for early repayment, although it's not as common as it was a decade ago. If there is a penalty, you're better off investing the money elsewhere, or splurging.
Some penalties are tied only to completing the loan before x years, so some homeowners will continue to apply extra to their principal until the loan is down to a few dollars and then pay a dime a month or such for years until the loan is past the repayment penalty.
In our example, on a $250,000 note over 30 years with a 6.5% rate, we would enter the amount of the extra payment ($125) and how many times a year we plan to make it (12).
BOOM! You just saved $69,932 in interest payments and chopped 5.5 years off the loan term.
The Benefits of Additional Paying
As you can see above, additional payments saves you money and shortens your term without affecting your budget dramatically. You'll reap the most benefit from this if you start early on; during the first few years, most of your payment goes toward interest. Extra contributions early will help build equity quickly.
The earlier you start, the better. As long as you do it faithfully and on time, you can expect to:
- Save an average of $50,000 in interest
- Fully pay off your loan an average of 6 years sooner
- Feel like a million dollars by being debt-free; you get real peace of mind.
- Have more financial freedom and security when you retire.
Paying More Monthly Vs. Additional Yearly Contributions
There are several ways to extinguish your loan early, but the two most popular plans are making fatter monthly payments, or making one extra contribution at the end of the year, which is the same size as your typical payments.
In the latter plan, you end up making 13 monthly payments a year instead of 12, and this appears to be the more profitable pay-off, provided you can discipline yourself into saving up enough.
In the example we used above, paying $125 more monthly reduced the interest by almost $70,000 and brought the loan term 5.5 years sooner. If we apply that $125 toward one lump sum contribution at the end of the year, it works out to approximately one extra monthly payment, but the savings are phenomenal when factored as a 13th payment.
Don't be alarmed at the calculator results as it is just showing your 13th contribution as part of your prior ones; the other contributions remain unchanged.
What changes is your savings! Just with that one-time yearly boost, you saved almost $78,000 in interest fees (compared to $70,000) and you're paid-off 6.2 years earlier (compared to 5.5 years).
Is it Better to Pay Extra Monthly or All at Once Yearly?
In general the sooner you make extra payments the more money you will save. If you pay extra right away then whatever amount your balance is reduced by won't accumulate interest for the remaining life of your loan. So if you have the ability to pay an extra $1,200 today, or stretch it out to an extra $100 per month you are better off paying the $1,200 today to immediately lower your balance. But if you have $200 saved up today and can save $100 a month it wouldn't make sense to wait 10 months to add $1,200 to a mortgage payment. You'd be better off paying whatever extra amount you can today.
Of course all financial issues have nuances.
- Families should have an emergency fund saved. Paying a bit extra today & then tapping a high-interest credit card next month which takes a number of months to pay off won't yield any interest savings.
- Interest on mortgage debt is tax deductible, whereas interest on many other forms of consumer debt are not. If you have other higher interest debts it can make sense to pay those off first, especially if you can't deduct their interest expense.
- Each individual small extra payment does not make a huge immediate difference, but has a compounding impact over the life of the loan. At a 5% rate of interest a payment of $1,200 will save $5 in monthly interest expense for the life of the loan. Over 30 years that can amount to $1,800 in interest savings.
- Some people struggle with discipline, while others have different emotional responses to the same experiences. One person might find it easier to automatically pay a bit more each month while another might get a sense of accomplishment by making a larger payment all at once.
- Whatever format helps you keep paying extra is the best strategy to use as automated habits routinely beat out our best stated intentions.
Winning With Bi-Weekly Payments
Bi-weekly payments are another way to create the equivalent of a 13th month. There are 52 weeks in a year, which means there are 26 biweekly periods. If you pay half your monthly payment 26 times a year that is like making 13 monthly payments. And nothing prevents you from combining bi-weekly payments with other extra payments.
One thing to be aware of is some payment firms will charge a fee for managing biweekly payments & in some cases those fees may exceed any interest savings, so make sure you can apply the method without being bogged down by needless fees.
Lump Sum Contributions
If you get an unexpected bonus from work or an inheritance you can quickly apply it toward the principal owed on your home. The above calculator supports recurring weekly, biweekly, monthly, quarterly or annual payments along with one-off lump sum contributions. Make sure you enter the frequency of contribution you would like to make, when the contribution begins & the amount of each contribution. Then click on the CALCULATE button to quickly see how much you'll save.
Experts agree that paying at an accelerated pace is a relatively painless way to save more of your money and achieve your dreams faster.