Mortgage Payoff Calculator - Pay Off Your Loan Early

Paying off your mortgage is one of the most important things you will ever do. Committing to repay your mortgage in 10, 20, or 30 years is a good choice. But what if you could cut that time down considerably? You could even knock years off your loan just by making one extra payment per year.

How Much Does One Extra Payment Matter?

Consider making an extra payment on your mortgage, because it can save you thousands of dollars. The fact is that just one payment can make a considerable difference in the total you pay for your home, and what's more, it can shave years off your mortgage. Take a look at the following example. You can use a mortgage payoff calculator to find this information for your own current loan.

If you currently have a $200,000 mortgage loan and you have secured an interest rate at 6.5 percent, your monthly payment is likely to be $1264 per month on a 30-year term. That is a considerable payment, and you may not realize the real facts of what you will be paying for the home you are purchasing. It will cost you far more than $200,000.

This information appears on the amortization statement you will see at the time of closing the sale on your home. Your lender must provide it before you sign your paperwork, so how much you will pay for your home once interest is factored in should not come as too much of a surprise. If you are still unsure, use a mortgage calculator to see what these numbers are for your particular situation.

What likely will shock you is just how much you can save by adding an additional payment to your loan. If you add just one more payment per year of $1264, as in the example above, you could save yourself quite a bit of money. Here's how it breaks down for you.

In this example, you have not only cut your interest costs by an outstanding savings of nearly $56,000, you have also cut the time you will be repaying your loan down to just 24 years instead of the full 30. You can figure that savings for your specific loan by using a mortgage payoff calculator. Simply calculate what an additional payment per year will do to your loan.

Where Can You Find an Extra Payment?

For some people, putting together an extra mortgage payment is not much of a strain. It is quite different for those who live paycheck to paycheck or whose budget is fully committed without much room. For these individuals, $1264 is a lot of money to put into a loan that you technically do not have to. Yet you may be able to do so without realizing that you are.

Most people get paid every two weeks, which amounts to 26 paychecks per year. Yet you only have to make 12 mortgage payments, one per month. If half of each paycheck goes to your mortgage, that still accounts for only 24 mortgage-based payments, leaving two extra paychecks per year that do not apply to your mortgage. Because of this, you likely have an additional month's mortgage payment available without realizing it.

Twice per year, you will have three paychecks in a month. Those extra paychecks can easily be applied to your mortgage so that you do not feel the pain. In fact, many mortgage companies will let you set up a payment schedule that withdraws half of your monthly payment every two weeks. You never really notice or feel in your budget that you have made that additional payment. Just make sure your lender applies this additional amount to your principal, not just your interest for the time frame.

There are many reasons to consider doing exactly this. First, you are investing your money into your home and saving yourself thousands of dollars. What's more, if you do need to borrow from your home's equity at some point, this extra money is available to you, socked away where it keeps saving you money.

Take the time to use a mortgage calculator to see just how much money you can save by investing one extra payment per year into your home. For those with a higher interest rate than the example listed, the savings are even greater. Increase your payment every two weeks slightly more and save even more. Taking charge of your mortgage is the first step. Use a mortgage payoff calculator to determine what it will take for you to do this.