Getting tired of your mortgage payments? Use our mortgage payoff calculator to see how much faster you can pay it off. You’ll be shocked how the extra amounts add up so quickly. This house payoff calculator is the perfect starting point to see how much faster you can pay off your home.
What You Need to Know About Early Mortgage Payoff
Paying off your mortgage is a huge accomplishment. But don’t let it scare you off. The truth is that paying off your house happens gradually over time. We paid off our mortgage quickly and the best thing you can do is start.
Because you are saving money in the easiest way possible. Take a look at your numbers, you will notice that the minute you start to put money down on the mortgage you save money in interest.
Fun fact (ok, not fun at all, but still interesting) You will pay about the same amount in interest as you did for your house. So if you buy a $200,000 home, you are going to pay another $200,000 in mortgage interest over the life of your mortgage.
So here’s why paying off your mortgage early is a good idea. First of all you save money on interest. Second of all, you reduce your overall spending on your house. If you pay it off early you could be saving tens, it not hundreds of thousands of dollars.
Best of all when your mortgage is paid off, you own your house free and clear and it’s a great way to sleep better at night.
An Overview of The Mortgage Payoff Calculator
The purpose of this calculator is to show you how quickly you can pay off your home when you consistently apply extra money to your mortgage every month.
Original Mortgage Details
This section is where you put in all of your original mortgage details. From there we will make an estimate of how much your mortgage payment is, if it’s a little higher or lower, don’t worry about it. This house payoff calculator is about showing you how much faster you can get rid of your mortgage.
Extra Payment Details
This is where you get to play around! Enter in how much extra you would like to put down on your mortgage every month and see what that does.
Original Mortgage Amount
The next section will show you how much interest you will pay on your mortgage if you never put any extra amount down on your mortgage.
Accelerated Mortgage Payoff
This section will show you how much interest you will pay on your mortgage once you start applying the extra monthly payment amount to your mortgage. Warning! The difference may startle you!
Monthly Savings from Extra Payments
This section sums up all of your extra payment details. There are three numbers here.
The first is potential interest saved. This is the amount that we save from putting down that extra amount on a consistent basis. As we can see, the default of $200 extra a month on a $220,000 mortgage can save you $32,907.
The next part is the percent of potential interest saved. In this case, that $32,907 saved is actually 12.91% of the original mortgage interest! That is a huge amount of money saved all for an extra $200 a month.
Using The Mortgage Payoff Calculator
We just covered the sections of the mortgage payoff calculator, but to make it easier for you we have created this video.
How to Use the House Payoff Calculator
The best thing to do is to play around with your monthly extra payment details. By doing this you can try out different scenarios and see how quickly you can get rid of your house payment. On a personal note, when we first started to do this we figured out how much it would take to pay it off in 5 years, (short answer we had to double up our payments) we started with smaller amounts and very quickly moved up our extra payments. Just over 6 years later we had our house paid off. Steady progress will go a long way when you are paying off your house. The key is to get started.
Mortgage Payoff Calculator Terms You Should Really Know (but they never taught you in school)
For some reason, people love to overcomplicate things. When it comes to money, this is the normal way to be. It’s not right so let’s clear the air.
Original Mortgage Amount
This is how much the bank lent you on day 1 to buy your house. Today that amount will be different and without logging into your bank to find out you will never know. So we make it easy on you by entering the amount you got when you bought the house.
Current Interest Rate
This is the amount that the bank ever-so-graciously lent you their money. We go with 6% but it can be anywhere from 0 and up.
Mortgage Term In Years
This is how long your mortgage will be. This isn’t to be confused with the mortgage term. What’s the difference? A mortgage is the full length that you plan on taking to payoff the house in full. The mortgage term is how long you will have the interest rate. Usually mortgage go anywhere from 5 to 40 years and the terms can be anywhere from 6 months to 10 years or more. For this number we want how long you were originally borrowing the money.
Date of First Payment
This one will be trickier, but not really. If you have never refinanced your mortgage, then it will be the day you have moved into your home. If you have refinanced it may be different. Use your best guess, if you are within a month it won’t affect the house payoff calculator too much.
What makes up a mortgage payment?
This is a really good question, and when you know the answer you will see why paying off your mortgage faster is a good idea. Your mortgage payment is split between two things. Mortgage principal and interest. Every payment you make there is a certain amount that goes onto the principal, and a portion goes to interest.
Now, for some not so good news (it’s not like Pennywise bad, but it’s not good either). When you first start to pay off your house (i.e. your first mortgage payment) the bulk of that money will go toward interest. The next payment a little more goes towards the principle (aka what you owe the bank), but it’s small. Like a few extra dollars small.
Thats why putting more down on your mortgage sooner is a good idea. When you do that, it all goes down on the principal and not towards interest (though you should double check that with your bank, because there are all sorts of rules when it comes to your mortgage).
Your first mortgage payment on $220,000 at 6% would see roughly $1086 go towards interest and $233 go to principal. You can see why it takes so long to pay off the house! But when you put an extra $200 on the payment. It all goes on the principal which means the interest stays the same ($1086), but the principal amount is $433.
That’s why you should try to pay off your house.
What’s Next Now That You Know How Fast You Can Payoff your Mortgage ?
Now that you have played around with your mortgage, you might want to see if you should refinance at a lower rate to see if that saves you any extra money (it did slightly for us).
After that the best thing is to contact your bank that holds the mortgage and ask the what you extra payment amounts are and then see if there are any penalties to putting down extra payments. Don’t assume that all mortgages are the same. They aren’t. A quick call, or email can help save you a lot of pain, frustration and money at the end.