Free amortization software, online amortization schedule calculators or simple spreadsheet programs easily recalculate principal and interest to demonstrate how additional payments impact the duration of the loan and the total interest paid. Consumers can experiment with different repayment scenarios so they can choose the right plan for their situation.Continue Reading
Any additional payments applied toward mortgage principal reduce the total amount in interest paid over the life of the loan, and they can also shorten the mortgage term. Consumers can choose to add a little extra every month, double the principal amount in each payment or pay one extra mortgage payment at the end of a year to pay down a mortgage. Each of these plans has different results.
At the end of a 30-year $100,000 mortgage at 4.5 percent interest with no additional payments, the total interest paid on the loan is $82,406. Adding one additional $556 mortgage payment at the end of each year reduces the overall interest paid by more than $14,000, and it reduces the term of the mortgage by four years and eight months. An additional payment of $75 each month applied to the principal saves almost $22,000 on interest paid, and it reduces the term of the mortgage by seven years.Learn more about Credit & Lending