Accelerate Your Path to Debt-Free Homeownership
Paying off your mortgage early is a powerful financial goal that can save you tens or even hundreds of thousands of dollars in interest and free up your cash flow for decades. Our Mortgage Payoff Calculator shows you the impact of making extra payments on your loan. By inputting your original loan details and the extra amount you plan to pay, you can see exactly how many years you'll shave off your mortgage and the total interest you'll save.
How Extra Payments Work Magic
When you make a regular mortgage payment, it's split between principal and interest. In the early years, a large portion goes to interest. However, any extra payment you make can be applied directly to the principal balance. Reducing the principal has a compounding effect:
- It immediately reduces your loan balance.
- It decreases the amount of interest calculated on your next payment, since the balance is lower.
- It causes more of your future regular payments to go towards principal, creating a snowball effect that accelerates your payoff.
The Calculation Process
The calculator works by simulating a new amortization schedule. It starts with your original monthly payment, but each month it adds your extra payment amount. This new, larger payment is then applied to the interest and principal as usual.
- Calculate the required monthly payment based on the original loan terms.
- Create a new amortization schedule month-by-month.
- For each month, the total payment is
(Required Monthly Payment + Extra Payment). - Calculate the interest due for that month on the current balance.
- Subtract the interest from the total payment to find the principal portion.
- Subtract the principal portion from the loan balance.
- Repeat until the loan balance reaches zero, counting the number of months it takes.
The total interest saved is the difference between the total interest you would have paid on the original schedule and the total interest you will pay on the accelerated schedule.
Practical Example
Let's take a $300,000 mortgage on a 30-year term at a 6% interest rate. The standard monthly payment is $1,798.65.
Now, let's say you decide to add just $200 extra to your payment each month.
- Standard Payoff: 30 years (360 payments). Total interest paid: $347,514.
- With $200 Extra/Month: The loan is paid off in approximately 23 years and 4 months (280 payments). Total interest paid: $255,595.
By adding just $200 per month, you would:
- Pay off your mortgage 6 years and 8 months earlier.
- Save $91,919 in interest payments.