1. What is the Amortization Loan Calculator?

The Amortization Loan Calculator with Extra Payments helps you understand how your mortgage payments are applied to principal and interest over time, and how making extra payments can save you money and shorten your loan term.

2. How Does the Calculator Work?

The calculator uses the amortization formula:

Where:

• \( P \) — Principal loan amount (USD)
• \( r \) — Monthly interest rate (annual rate ÷ 12)
• \( n \) — Number of monthly payments (term in years × 12)
• \( PMT \) — Monthly payment amount

Explanation: The formula calculates the fixed monthly payment required to fully amortize a loan over its term, accounting for compound interest.

3. Importance of Extra Payments

Details: Extra payments are applied directly to the principal, reducing the total interest paid and potentially shortening the loan term significantly.

4. Using the Calculator

Tips: Enter the loan amount, interest rate, and term. Optionally add an extra monthly payment to see how it affects your loan. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How much can I save with extra payments?
A: Even small extra payments can save thousands in interest and reduce your loan term by years, as they're applied directly to principal.

Q2: Should I pay extra each month or make one annual payment?
A: Monthly extra payments save more because interest is calculated monthly - the sooner you reduce principal, the less interest accrues.

Q3: Does this calculator account for changing interest rates?
A: No, it assumes a fixed-rate mortgage. For adjustable-rate mortgages, results would change when rates adjust.

Q4: Are there any prepayment penalties?
A: Most modern mortgages don't have prepayment penalties, but check your loan terms to be sure.

Q5: How accurate is this calculator?
A: It provides accurate estimates for fixed-rate loans, but your actual payment may vary slightly due to rounding or specific lender policies.