Extra Pay Calculator
The Extra Pay Calculator is a free tool available on websites that you can use to see how your monthly payments impact your overall loan term. All you have to do is enter your active mortgage details and enter the additional monthly payment amount. The calculator will then present you with a graph showing the difference between the mortgage period of the active loan and the projected period based on your new payment.
Why pay extra on your mortgage?
Mortgages are a great way to purchase a home however depending on your situation, you might also be paying amounts in fees and interest which cost you money but don’t go ahead in helping you complete your loan, if anything they increase the load of your debt. The monthly payments of your loan start by first covering your interest payments for the most part and only start covering your principal amount much later, once your interest payments have been almost paid. This means you don’t start paying off your actual loan until after the interest payments are mostly completed.
You can resolve this by making extra payments, it might sound counter-intuitive at first but consider how a mortgage works. You take out a loan for a certain amount on which interest rates apply. The duration of your loan in years, interest rates and the total amount you pay are all related. Your interest rate is a certain percentage applied on your loan amount for the duration of your mortgage. So if you paid more amounts on a monthly basis, it will not only reduce the total interest amount but also reduce your overall mortgage period.