Some people make the mistake of choosing the largest mortgage payment that they can possibly afford when they purchase a house. While it might make sense at their current income levels, if they lose their job or go through an extended illness and have to miss a lot of time from work — or if they go through a divorce and have to go to separate households, that can cause big problems — and cause them to have to sell under duress.
Another way to manage this is to choose a house that costs less than what you absolutely can afford, or choose a longer amortization period for the loan. That keeps the payments lower — but it also allows you to save a ton of money on interest expense by making larger payments than what you have to. If you have an open mortgage, you’re paying higher interest, but you also don’t have any limits on your ability to pay off the note at a faster pace than the amortization schedule. Even with a closed mortgage, most lenders will offer you a prepayment privilege, offering you the chance to prepay a set amount (as high as 20 percent of your initial principal balance) each year without any penalty.
Mortgage payoff calculator extra payments
Here’s where a mortgage early payoff calculator can be really helpful. It’s nice to sit back and think about how great it would be to pay off 5 percent or 10 percent of your principal in a year, but unless you figure out how that will work on a monthly basis, it’s easy to lose the discipline that this sort of saving would require. This calculator asks you the basic questions about your mortgage: payment type, amortization, years left, the original principal, the interest rate and the amount you think you can pay each month on top of your existing mortgage payment. The calculator tells you how much shorter your loan will be if you can keep those payments up, and it tells you how much you will save over the life of the loan. Even paying $100 extra per month on your mortgage can add up to significant savings over time, because of the sheer length of the loan. Even if you use a 20-year amortization rather than a longer period, that’s 240 payments. $100 per payment means you’re paying $24,000 of the note sooner than your amortization table anticipates, which means you’re cutting payments off the end — and saving a lot in interest.
Try Our Mortgage Payoff Calculator – How much interest can you save by increasing your mortgage payment? This financial calculator helps you find out.