1. What is Extra Principal Payment?

Extra principal payments are additional amounts paid toward your mortgage principal beyond the required monthly payment. These payments reduce your principal balance faster, saving you interest over the life of the loan.

2. How Does the Calculator Work?

The calculator uses the formula:

Where:

• \( r \) — Annual interest rate (in decimal)
• \( \text{Extra} \) — Extra principal payment amount
• \( \text{Remaining Term} \) — Years remaining on mortgage

Explanation: The formula estimates the approximate interest savings from making regular extra principal payments.

3. Importance of Extra Payments

Details: Making extra principal payments can significantly reduce the total interest paid over the life of the loan and shorten the loan term.

4. Using the Calculator

Tips: Enter your mortgage interest rate as a percentage, the amount of extra principal you plan to pay each period, and the remaining term of your loan in years.

5. Frequently Asked Questions (FAQ)

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

Q2: Should I pay extra principal or invest?
A: This depends on your mortgage rate vs. expected investment returns. Paying down debt provides a guaranteed return equal to your interest rate.

Q3: Are there prepayment penalties?
A: Most mortgages don't have prepayment penalties, but check your loan terms to be sure.

Q4: How do extra payments affect amortization?
A: Extra payments reduce principal faster, which reduces future interest calculations and can shorten your loan term.

Q5: Is it better to make monthly or lump sum extra payments?
A: Monthly payments provide consistent savings, but any extra payment helps. The sooner you make extra payments, the more you'll save.