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Mortgage Amortization Formula:
Where:
M = Monthly payment
P = Principal loan amount
r = Monthly interest rate
n = Number of payments
| From: | To: |
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 the principal portion increasing over the life of the loan.
Making extra payments directly reduces your principal balance, which in turn reduces the total interest paid and can significantly shorten your loan term. Even small additional payments can have a large impact over time.
Monthly Payment: Your regular payment plus any extra amount you specify.
Saved Time: How many months sooner you'll pay off your mortgage.
Saved Interest: Total interest savings over the life of the loan.
Tips: Enter your loan amount, interest rate, and term. Add any planned extra monthly payment to see how it affects your payoff timeline and total interest.
Q1: How much can I save with extra payments?
A: Even $50-100 extra per month can save thousands in interest and reduce your term by years.
Q2: Should I pay extra each month or make lump sum payments?
A: Regular extra payments have more impact, but any extra helps. Choose what fits your budget.
Q3: Does this calculator account for changing interest rates?
A: No, it assumes a fixed-rate mortgage. ARMs would require different calculations.
Q4: Are there prepayment penalties?
A: Most modern mortgages don't have them, but check your loan terms to be sure.
Q5: Should I pay off mortgage early or invest?
A: This depends on your interest rate vs. expected investment returns and personal risk tolerance.