Extra Principal Payments Calculator

In this new and maybe crazy era of negative amortization and interest only loans, it is very refreshing for us to discuss and illustrate the merits of actually adding to your monthly payments. Generally speaking, if you increase the amount of your scheduled monthly payment, the entire increased amount will be applied directly to principal reduction. This, in turn, creates two obvious benefits: The remaining term of your loan will be shortened, and the total amount of interest you will pay on your loan will be reduced.

First, we’ll let you view an example of just what we are referring to. Then, we’ll have you work with your existing mortgage and actually determine some of those benefits that are available to you.

In our example, our loan will have the following terms:

             
 

Current Loan Balance

       
 

Current Interest Rate

 

 

%

 

 

Current Monthly Payment

 

 

 

 

 

Remaining Term

 

 

Months

 

 

 

         

Now, we will assume payment increases from $1,896.20, to $2,000.00, $2,200.00, $2,500.00 and finally $3,000.00. Here’s what our example looks like.

“OUR EXAMPLE”

             

Monthly
Payment

Increase

Payoff
in Months

# Saved

Total
Interest
Paid

Interest
Saved

 

1,896.20 

 

360 

 

382,632.00 

 

 

2,000.00 

103.80 

310 

50 

320,000.00 

62,632.00 

 

2,200.00 

303.80 

249 

111 

247,800.00 

134,832.00 

 

2,500.00 

603.80 

195 

165 

187,500.00 

195,132.00 

 

3,000.00 

1,103.80

145 

215 

135,000.00 

247,632.00 

 
             

As illustrated in “OUR EXAMPLE”, a payment increase of just $103.80 per month will shorten the term of the loan from 360 months to 310 months and save the borrower $62,632.00 in interest.

TIP – You probably noticed that the increased payments used in “OUR EXAMPLE” are all rounded to an even hundred, i.e. 2,000, 2,200, etc. While any increase in payment is beneficial, the sole reason for rounding to an even hundred is simple…….it’s easier to fit on a check……see for yourself:
One-Thousand, Eight-Hundred, Ninety-Six and 20/xx
Vs.
Two-Thousand and no/xx
or
Twenty-Two Hundred and no/xx
 

Now, let’s create “YOUR EXAMPLE”. You can begin by providing the following information about your current loan:

“YOUR EXAMPLE”

             
 

Current Loan Balance

 

 

 

 

 

Current Interest Rate

 

 

%

 

 

Current Monthly Payment

 

 

 

 

 

Remaining Term

 

 

Months

 
     
     
             
Your results will appear here once you enter your loan information and press the [Calculate] button.