Mortgage Savings Calculator
How much extra principal you plan to pay each month.
How to Save Thousands on Your Mortgage
Paying off a mortgage is one of the largest financial challenges most homeowners face. The secret to significantly **reducing your total interest paid** and **cutting years off your loan** lies in understanding the power of principal prepayment. Our calculator demonstrates how even a small, consistent extra payment can dramatically reshape your financial future.
The Power of Principal Prepayment
In the early years of a mortgage, the majority of your monthly payment goes toward **interest**. When you make an extra payment, that entire amount is applied directly to the **principal** (the amount you actually borrowed). This means you immediately start accruing less interest the following month. Over 10, 20, or 30 years, this compound effect results in tens of thousands of dollars in savings and a drastically reduced loan term.
- **Interest Savings:** Every extra dollar applied today is a dollar that avoids accruing interest for decades.
- **Reduced Term:** By consistently paying extra, you shorten the lifespan of the loan, saving years of payments.
- **Building Equity:** You build equity in your home faster, increasing your personal wealth.
Frequently Asked Questions (FAQ)
Q: What is the minimum extra payment I should make?
A: Any amount is better than none! Even rounding up your payment to the nearest hundred dollars (e.g., paying $1,250 instead of $1,208) can save thousands over the life of the loan. Use the calculator to experiment!
Q: Does paying extra monthly reduce my required payment?
A: No, your required minimum payment remains the same, but you gain the freedom of paying off the loan much faster. You should confirm your lender applies the extra funds directly to the principal.
Q: Is a bi-weekly payment plan better than monthly?
A: A bi-weekly plan is effectively an accelerated payment plan, as you end up making one extra full monthly payment each year. Our calculator focuses on the easier method of making a simple, extra monthly principal contribution.