How Much Time and Money Can You Save Through Additional Mortgage Payments?
Many homeowners opt into whichever mortgage term works best for their situation, and don’t think twice about changing their monthly mortgage payment after all is said and done. While this is strategy is completely acceptable, you can save thousands of dollars of interest and years of mortgage payments by making additional mortgage payments. Keep in mind that to save money through a lower interest rate, you’ll need to refinance, but if you have already locked in a low interest rate, you may want to consider making additional mortgage payments if your budget allows.
Use the additional mortgage payment calculator below to understand how much money you can save in interest and how many years you’ll shave off your mortgage. Contact Homesite Mortgage if you have any questions about how much you could save through additional mortgage payments.
Additional Mortgage Payment Calculator Definitions
- Loan Amount: The loan amount is the original amount of the loan you took out in order to purchase your home. Note that the loan amount does not include the down payment. Your loan amount is the amount you solely borrowed from your lender.
- Annual Interest Rate: The annual interest rate is the interest that’s charged on top of your principal payments of your home loan. The lower interest rate you’re able to lock in, the less you’ll be charged each monthly for your mortgage payment. In the initial years of your mortgage, your mortgage payments will mostly go toward interest, but eventually the payments will start paying off the principal portion of the loan.
- Loan Term: The loan term is how long the mortgage is expected to take to be repaid. Traditional loan terms are 15 years and 30 years. With a 15-year mortgage, you’ll be making payments for 15 years (unless you opt to make additional payments, which in the case, your unofficial loan term will end up being shorter).
- Start Date of Mortgage: The start date of the mortgage is simply the month and year you began making mortgage payments on your home loan.
- Additional Payment Amount: The additional payment amount is how much you are able to put toward your mortgage on top of your monthly mortgage payments.
- Number of Additional Payments: The number of additional payments per year is how frequently you will make the additional payment (listed in the box above) each year remaining in your mortgage.
- Start Date of Additional Payment: This is the month and year of your mortgage that you start(ed) making the additional mortgage payments.
- Balance Schedule: Check this box if you want to see the updated schedule of your mortgage balance with the additional mortgage payments taken into account.
- Time Saved: The time saved is the amount of years and months you won’t be making mortgage payments (based off your original mortgage schedule) due to the additional mortgage payments.
- Total Interest Savings: This figure reflects how much money you saved in interest by paying your mortgage off sooner than what the original loan term entailed.
Additional Mortgage Payment Calculator FAQs
What’s the most effective way to reduce the amount of interest paid throughout my mortgage?
With the exception of refinancing to a lower interest rate, making additional mortgage payments is a great way to save thousands of dollars in interest. The earlier in your mortgage you make additional mortgage payments, the more money you’ll save in interest, since the interest is paid off first over the course of your mortgage.
I want to make an additional mortgage payment—any tips?
Be sure to let Homesite Mortgage know what the additional mortgage payment is to go toward—the principal of the mortgage or your escrow account. It’s important to note what the purpose of the additional mortgage payment is for so it’s not interpreted as an early payment for the following month.
Does it ever not make sense to make additional mortgage payments?
Be sure to take into consideration how much your tax deduction will be with the interest charged on your annual mortgage. Speak with your tax preparer to calculate if you’ll incur more savings through paying less in interest with additional mortgage payments, or through the tax deduction you’ll receive through your mortgage interest.
Why make additional payments toward my mortgage?
Many homeowners strive to be debt-free, and want to free up some of their monthly expenses sooner than what terms of the original mortgage.