Extra Payment on Home Loan

Loan Payment Formula:

\[ PMT = P \times \frac{r \times (1 + r)^n}{(1 + r)^n - 1} \]

Principal Amount (P):

USD

Annual Interest Rate:

Loan Term:

years

Extra Monthly Payment:

USD

Regular Monthly Payment:

Payment with Extra:

Time Saved:

Interest Saved:

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1. What is the Extra Payment on Home Loan Calculator?

This calculator shows how making extra payments toward your mortgage principal can save you money on interest and shorten your loan term. It compares regular payments with payments that include additional principal amounts.

2. How Does the Calculator Work?

The calculator uses the standard loan payment formula:

\[ PMT = P \times \frac{r \times (1 + r)^n}{(1 + r)^n - 1} \]

Where:

$ PMT $ — Monthly payment
$ P $ — Principal loan amount
$ r $ — Monthly interest rate (annual rate ÷ 12)
$ n $ — Number of payments (loan term in months)

Extra Payment Calculation: The calculator then adds your extra payment to the principal portion of each payment and recalculates how quickly the loan will be paid off.

3. Importance of Extra Payments

Details: Even small extra payments can significantly reduce total interest paid and shorten your loan term. This is because extra payments go directly toward reducing the principal balance, which in turn reduces the amount of interest charged in subsequent periods.

4. Using the Calculator

Tips: Enter your loan amount, interest rate, and term. Then add any additional monthly payment you plan to make toward principal. The calculator will show your savings in time and money.

5. Frequently Asked Questions (FAQ)

Q1: How much can I save with extra payments?
A: Savings depend on your loan amount, interest rate, and how much extra you pay. Even $50-$100 extra per month can save thousands in interest.

Q2: Should I refinance or make extra payments?
A: If you can get a significantly lower rate, refinancing might be better. Otherwise, extra payments are a simple way to save without refinancing costs.

Q3: Are there penalties for extra payments?
A: Most loans allow extra payments, but some have prepayment penalties. Check your loan terms.

Q4: Is it better to make one annual payment or monthly extras?
A: Monthly extra payments save slightly more because the principal is reduced sooner, but either method helps.

Q5: Should I pay off my mortgage early or invest?
A: This depends on your interest rate vs. expected investment returns. Paying off a high-rate mortgage often makes sense.