Calculator: How much will I save by increasing my mortgage payment? (2024)

FAQs

How much can you save by making an extra mortgage payment? ›

When you pay extra on your principal balance, you reduce the amount of your loan and save money on interest. Keep in mind that you may pay for other costs in your monthly payment, such as homeowners' insurance, property taxes, and private mortgage insurance (PMI).

If you pay $200 extra a month towards principal, you can cut your loan term by more than 8 years and reduce the interest paid by more than $44,000. Another way to pay down your mortgage in less time is to make half-monthly payments every 2 weeks, instead of 1 full monthly payment.

Making Extra Monthly Payments Calculator

Use our extra payment calculator to determine how much more quickly you may be able to pay off your debt. Making extra payments of $500/month could save you $60,798 in interest over the life of the loan. You could own your house 13 years sooner than under your current payment.

Just paying an additional $100 per month towards the principal of the mortgage reduces the number of months of the payments. A 30 year mortgage (360 months) can be reduced to about 24 years (279 months) – this represents a savings of 6 years!

Throwing in an extra $500 or $1,000 every month won't necessarily help you pay off your mortgage more quickly. Unless you specify that the additional money you're paying is meant to be applied to your principal balance, the lender may use it to pay down interest for the next scheduled payment.

Increasing your monthly payments, making bi-weekly payments, and making extra principal payments can help accelerate mortgage payoff. Cutting expenses, increasing income, and using windfalls to make lump sum payments can help pay off the mortgage faster.

When you pay an extra $100 on your monthly mortgage payment, that entire amount goes to principal. You'll reduce your total balance much more quickly when you make an extra payment that goes directly to repaying your balance. You could cut around four years off your repayment time with just an extra $100 per month.

The additional amount will reduce the principal on your mortgage, as well as the total amount of interest you will pay, and the number of payments.

What happens if I pay an extra $5000 a month on my mortgage? ›

Making additional principal payments will shorten the length of your mortgage term and allow you to build equity faster. Because your balance is being paid down faster, you'll have fewer total payments to make, in-turn leading to more savings.

Extra mortgage payments are generally applied to your principal so that they shorten the amount of time it takes to pay off your mortgage. You may be able to "recast" your mortgage. This means you will still pay it off by the original date but with new, smaller monthly payments.

Amortization extra payment example: Paying an extra $200 a month on a $464,000 fixed-rate loan with a 30-year term at an interest rate of 6.500% and a down payment of 25% could save you $115,843 in interest over the full term of the loan and you could pay off your loan in 301 months vs. 360 months.

As you can see, the principal balance of the mortgage decreases by more than the extra $300 paid each month. For example, if you pay an extra $300 each month for 24 months at the start of a 30-year mortgage, the extra amount by which the principal balance is reduced is greater than $7,200 (or $300 × 24).

When you pay an extra $100 on your monthly mortgage payment, that entire amount goes to principal. You'll reduce your total balance much more quickly when you make an extra payment that goes directly to repaying your balance. You could cut around four years off your repayment time with just an extra $100 per month.

As a general rule of thumb, making one extra mortgage payment per year at the start of your 30-year mortgage can shorten the term by approximately four to five years. You could potentially pay off the mortgage and own the home outright in 25 to 26 years instead of 30.