Mortgage Calculator With Extra Payments And Lump Sum

Mortgage Amortization Formula:

\[ M = P \frac{r(1+r)^n}{(1+r)^n - 1} \]

Loan Amount:

Annual Interest Rate:

Loan Term:

years

Extra Monthly Payment:

Lump Sum Payment:

Base Monthly Payment:

Total Payment with Extras:

Adjusted Payment after Lump Sum:

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1. What is Mortgage Amortization?

Mortgage amortization is the process of paying off a loan through regular payments over time. Each payment covers both interest and principal, with the interest portion decreasing and principal portion increasing over the loan term.

2. How Does the Calculator Work?

The calculator uses the standard amortization formula:

\[ M = P \frac{r(1+r)^n}{(1+r)^n - 1} \]

Where:

\( M \) — Monthly mortgage payment
\( P \) — Principal loan amount
\( r \) — Monthly interest rate (annual rate ÷ 12)
\( n \) — Total number of payments (loan term in years × 12)

Explanation: The calculator adjusts for extra monthly payments and lump sum payments to show how they reduce your overall payment amount and loan term.

3. Benefits of Extra Payments

Details: Making extra payments toward your mortgage principal can significantly reduce the total interest paid and shorten the loan term. Even small additional payments can have a substantial impact over time.

4. Using the Calculator

Tips: Enter your loan amount, interest rate, and loan term. Optionally include extra monthly payments and/or a lump sum payment to see how they affect your mortgage payments and overall loan cost.

5. Frequently Asked Questions (FAQ)

Q1: How do extra payments affect my mortgage?
A: Extra payments reduce your principal balance faster, which decreases the total interest paid and can shorten your loan term significantly.

Q2: Should I make extra payments or invest the money?
A: This depends on your mortgage interest rate vs. potential investment returns. Generally, if your mortgage rate is higher than expected investment returns, paying down debt may be better.

Q3: Are there penalties for extra payments?
A: Most mortgages allow some extra payments, but check your loan agreement for prepayment penalties or limits on additional payments.

Q4: How does a lump sum payment work?
A: A lump sum payment directly reduces your principal balance, which immediately lowers your remaining interest costs and may reduce your monthly payments if you recast your mortgage.

Q5: Can I change my extra payment amount over time?
A: Yes, you can adjust extra payments as your financial situation changes. Even irregular extra payments can help reduce your overall loan cost.