1. What is Mortgage Amortization?

Mortgage amortization is the process of paying off a loan with regular payments over time. Each payment covers both interest and principal, with the interest portion decreasing and principal portion increasing over the loan term.

2. How Does the Calculator Work?

The calculator uses the standard mortgage payment formula:

Where:

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

Extra Payments: Additional payments reduce the principal faster, saving interest and shortening the loan term.

3. Importance of Extra Payments

Benefits: Even small extra payments can significantly reduce total interest and loan term. For example, $100 extra per month on a $300,000 loan at 4% can save ~$28,000 and pay off the loan 4 years early.

4. Using the Calculator

Tips: Enter principal amount, interest rate, loan term, and optional extra payment. All values must be positive numbers. The calculator shows monthly payment, total interest, and savings from extra payments.

5. Frequently Asked Questions (FAQ)

Q1: How do extra payments affect amortization?
A: Extra payments directly reduce principal, which reduces future interest and can shorten the loan term significantly.

Q2: Should I pay extra principal or refinance?
A: Compare options - extra payments work best when rates are low, while refinancing may be better when rates drop significantly.

Q3: Are there prepayment penalties?
A: Some loans have prepayment penalties - check your loan terms before making extra payments.

Q4: How often should I make extra payments?
A: Regular extra payments (monthly) have the greatest impact, but even annual lump sums help.

Q5: Does this work for all loan types?
A: This calculator works for fixed-rate loans. Adjustable-rate mortgages require more complex calculations.