Índice

• What the early mortgage payoff calculator tells you
• How to use Rate’s mortgage calculator with extra payments
• How extra payments save you money
• Know these extra payment considerations
• How to reduce your future mortgage payments
• Explore our other mortgage calculators
• Find a mortgage payment strategy that works for you

What the early mortgage payoff calculator tells you

Everyone wants to own their home free and clear as soon as possible. Putting down more money each month can get you closer to that goal, but in the short term, it also means you’ll have fewer funds in your bank account.

Need help deciding if extra mortgage payments are worth it? Our early mortgage payoff calculator with extra payments gives you an idea how those additional payments affect the amount of interest you’ll owe over the life of your home loan. Using this early mortgage payoff calculator also shows how you might be able to shorten your amortization schedule and gain full ownership of your home sooner than you anticipated.

With that information in hand, you can decide if it makes sense to put more money toward your mortgage each month, make extra payments sprinkled throughout the year or just stick with your existing payment schedule. Depending on the results, you may realize that you’d rather have that money in your pocket than close out your home loan before the original end date.

You may have noticed this mortgage payoff calculator looks a little bit different from our main mortgage calculator. The two serve very different purposes. If you want to see how much your monthly mortgage payments will be based on the size of your home loan, your down payment and your interest rate, go with our primary mortgage calculator. Use this extra payments tool if you only want to know how paying more money on top of your regular monthly mortgage will impact the total cost and length of your home loan.

How to use Rate’s mortgage calculator with extra payments

Our mortgage payment calculator can show you how long it will take to pay back your home loan if you make larger or more frequent payments. You can also see how those payment changes could affect the amount of interest you owe over the life of the home loan. But first, you need to gather up some key information to plug into our mortgage calculator with extra payments. That info covers two main areas:

• Original loan terms
• Extra payments

Original loan terms

The first bit of information you need to use Rate’s mortgage payoff calculator is simply the original terms of your loan, including:

• Original loan amount: What’s the size of your mortgage?
• Original appraised value: How much is your house actually worth?
• Original loan term: How long is the life of your loan?
• Yearly property tax: How much do you pay in property taxes each year?
• Yearly property insurance: How much do you owe for homeowners insurance each year?
• Interest rate: What’s your current mortgage rate?

This is your status quo — or control group, if you will. If nothing changes, these are the terms of your home loan you will need to continue following through the rest of the loan.

Extra payments

Now the rubber truly meets the road. Plug in different payment values to see how they impact your amortization schedule. There are a few different variables to play around with here, so you want to be sure you understand how they might affect the mortgage payment calculator’s results.

• Lump sum vs. recurring payments
• Payment frequency
• Payment amount

Lump sum vs. recurring extra payments

You have two options for making extra payments on your mortgage. On one hand, you could make a one-time lump sum payment to pay down your loan. That could make sense if you find yourself the beneficiary of a sudden financial windfall — say, due to inheritance, salary bonus or tax return.

On the other hand, you could schedule recurring payments on top of your regular monthly payments to chip away a little more at your mortgage each month. Our mortgage calculator with extra payments lets you try out both methods to see which, if either, approach makes sense for your budget.

Extra mortgage payment frequency

If you go with a recurring payment, you need to decide how often you’ll be putting down more money toward your mortgage. This mortgage payment calculator gives you the option to choose from monthly or annual extra payments. You can even set it up to make extra payments over a specific period of time — for instance, paying an additional $500 per month for the next 12 months. Be sure to keep an eye on the “extra payments start” and “extra payments end” fields to accurately map out your amortization schedule.

Even if you go the lump sum route, you can still play around with the payment frequency. Maybe you want to see how much of a dent you’ll put into your mortgage by paying $1,000 extra every year. Or perhaps you’re considering making two extra mortgage payments a year. Our mortgage payment calculator gives you the flexibility to find out what that would mean for the total cost of your home loan.

Extra mortgage payment amount

Of course, the most impactful piece of information to include is the amount of money you intend to pay on top of your regular home loan installments. The more you’re willing to put down, the bigger effect those extra payments will have on the overall cost and length of your mortgage.

Keep in mind that making smaller recurring payments will add up over time. So, even if you can only afford to carve out an extra $50 for your mortgage every month, you could still see a major impact on the amount you pay over the course of a 30-year or 15-year fixed rate mortgage.

How extra mortgage payments save you money

When you take out a mortgage, you owe more money to the lender than just the amount of the home loan itself. You will also pay interest over the duration of a loan, whether it’s a 30-year fixed rate mortgage or 7-year adjustable rate mortgage (ARM). By shortening the amortization schedule, you can pay less interest on your mortgage over the long run.

Let’s take a look at a pretty standard example of extra mortgage payments at work. In this scenario, you took out a 30-year fixed rate mortgage totaling $200,000. We’ll assume you haven’t refinanced your mortgage yet to take advantage of lower interest rates, so you’re currently looking at a 4% interest rate. On top of that, you pay $2,500 in property taxes each year (right around the national average) and $1,300 for your homeowners insurance (again, pretty close to the national average).

Those are pretty standard numbers when it comes to mortgage terms. There’s nothing that deviates from the norm in any meaningful way. If you were to pay an extra $100 on your monthly mortgage payments starting from Day One of your home loan (be sure to put “30” in the “Extra payments end — year” field), you would potentially save $37,069 over the entire life of the loan. On top of that, you’d shave 59 months off the length of your mortgage. That means you’d own your home outright roughly five years sooner than you originally planned.

Know these extra payment considerations

The tradeoff between those extra mortgage payments and the savings on your interest may not be worth it in every situation. That’s what makes our early mortgage payoff calculator so valuable: You can get an idea of how much money you’ll spend on interest over the course of your loan, helping you decide if it’s worth the cost of recurring payments or a lump sum.

As you work with the mortgage payoff calculator, think about these other concerns and how they might impact your financial situation:

• Do you have other debts to pay off?
• How much will you save on interest?
• Are there additional payment fees?
• What type of mortgage do you have?

Do you have other debts to pay off?

Quickly building equity in your home is great, but it shouldn’t come at the expense of your other financial obligations. Neglecting car loans, student loans and outstanding credit card balances in favor of putting more money than required on your monthly mortgage may cancel out whatever savings you stand to gain — not to mention ruin your credit score. That’s especially true if you’re carrying a large amount of debt with a high interest rate.

Your mortgage will very likely outlive your other loans. It may make more sense to focus on repaying those smaller, short-term loans before making extra payments on your mortgage. Once those debts are settled, you can put all of your attention on building equity in your home more rapidly through added payments.

How much will you save on interest?

When using our mortgage payoff calculator, it’s important to weigh the short-term added costs against the long-term potential savings. You want to be comfortable with the amount of extra money you’re putting down on your monthly installments so it doesn’t impact your standard of living. It doesn’t always make sense to stretch your budget just to cut down on the length of your home loan or save more money over the span of two or three decades

With that in mind, you need to consider how much money you actually stand to save on your mortgage interest and decide if it’s worth the added expense. Compare the amount you’ll save each year in interest with the amount you’ll spend on extra mortgage payments.

Are there additional payment fees?

Some — but not all, mind you — lenders will tack on additional fees that could impact your payment plan. Prepayment penalties, in particular, should give you pause if you plan to make a large payment to significantly reduce your principal in the first few years of your home loan. Lenders that apply such penalties often do so for principal curtailments representing 20% or more of the original loan amount. Although prepayment penalties are extremely rare for qualified mortgage products, it’s good to be aware of them, nonetheless.

Lenders may calculate prepayment fees differently — for instance, using a percentage of the total loan amount or instituting a flat fee for every mortgage regardless of size. Your loan estimate, given within three days of your mortgage application, will indicate if there is a prepayment penalty. So, you should have plenty of notice regarding these charges.

What type of loan do you have?

While there are many different types of home loans to consider, most borrowers decide to go with either a conventional fixed-rate mortgage or an ARM. That decision may influence your mortgage payment strategy due to the different ways those two loan types handle interest rates. Some loan officers may recommend paying extra on ARM mortgages each month to build equity in your home at a faster rate.

How to reduce your future mortgage payments

Paying more than you owe each month isn’t the only way to cut into your home loan and build equity in your house. Consider these possible alternatives, none of which ask you to increase your monthly housing costs:

• Refinance your mortgage for a lower interest rate
• Consider a different type of loan

Refinance your mortgage for a lower interest rate

Without a doubt, one of the best ways to reduce the total cost of your home loan is refinancing. Mortgage rates are always fluctuating, so it’s good to strike when the iron’s hot. Take advantage of interest rates that dip down to (or close to) historic lows to set yourself up for long-term savings. Check out the latest interest rates to see if now’s a good time to refinance your mortgage.

Consider a different type of loan

In addition to offering you a lower interest rate, refinancing your mortgage could also lower your monthly payments depending on the specific loan terms you select. For instance, moving from a 15-year fixed-rate mortgage to a 30-year loan will dramatically reduce the amount you owe each month since you’re doubling the length of your agreement. In some cases, going from an ARM to a fixed-rate mortgage might lower your monthly costs if you can secure a lower interest rate.Be sure to consult a loan officer before making any final decisions about refinancing so you fully understand how those changes will impact your amortization schedule and total loan cost.

Explore our other mortgage calculators

Rate has several mortgage calculators to help you make more informed decisions throughout the entire homebuying journey:

• Refinancing calculator: No matter what interest rate you agree to when you take out a mortgage, you always have the option to refinance later on to take advantage of lower rates. Our refinancing calculator gives you an idea of how much you might save on interest compared with closing costs and other associated refinancing fees.
• Mortgage calculator: It’s one thing to get approved for a mortgage; comfortably paying that mortgage each month is another matter entirely. Use our mortgage calculator to map out your mortgage payments and see what number best fits your budget.
• Home affordability calculator: Before you set out to look at houses, you should know what your homebuying budget looks like. This home affordability calculator lets you set the right expectations from the get-go, narrow down your house search and avoid any let downs.
• Closing cost calculator: Down payments and mortgages may get all the focus, but they’re not the only expenses you need to consider when buying a house. From origination fees to title insurance, there are a lot of final closing costs borrowers need to cover. Our closing cost calculator helps you anticipate those charges and plan accordingly.
• Fixed-rate mortgage calculator: Choosing between a 15-year or 30-year fixed rate mortgage is a huge decision, but our fixed-rate mortgage calculator makes it a little bit easier on you. See how each type of mortgage affects your monthly payments, interest rates and total loan costs.
• Rent or buy calculator: How do you know when you’re ready to give up on rental life and buy your own house? Our rent or buy calculator can help you figure it out, looking at key factors like equity, housing costs, maintenance and insurance.
• Mortgage points calculator: “Buying down the rate” is one of the more misunderstood aspects of the lending industry, but it doesn’t have to be. With our mortgage points calculator, we’re clearing up any confusion about this topic and helping borrowers decide if this approach suits their needs.

Find a mortgage payment strategy that works for you

Everyone deserves an amortization schedule that they’re comfortable with while steadily building equity in their home. Whether you want to make extra payments on your mortgage each month or refinance your home loan to take advantage of lower interest rates, there are plenty of different ways to manage your housing costs.

Talk to a loan officer to understand all of the different options available to you so you can make the most informed decision about your future mortgage payments.

Disclaimers

• Sample rate and loan scenario provided for illustration purposes only and are not intended to provide mortgage or other financial advice specific to the circumstances of any individual and should not be relied upon in that regard. Rate, Inc. cannot predict where rates will be in the future.
• Savings, if any, vary based on consumer’s credit profile, interest rate availability, and other factors.
• To understand the terms of repayment and review representative examples please review the information here.