Home Mortgage Calculator Extra Payments - Strategies for Reducing the Total Cost of Your Loan
Too many people just pay the minimum on their home mortgage every month in the belief this saves them money. This is a false opinion. Over the long run home owners will save a lot of money making extra payments every month. And using a home mortgage calculator you can figure out just how much money extra payments will save you.
How much do you pay on your loan every month? Assuming you’re one of the lucky people who is actually able to make a payment on your mortgage every single month there’s a really good chance you’re only making your monthly minimum payment every time your statement drops into your mailbox. This seems to make sense at first- your monthly minimum is a stable amount of cash you can budget for and it is probably an amount of money you are not only habituated towards paying, it’s likely a sum you feel comfortable paying. With everyone’s budgets stretched to the limits these days paying the absolute minimum on your home loan probably seems to be common sense.
But Since When Has Common Sense Actually Made Any Sense?
Here’s the thing… simply paying the minimum on your home mortgage is the worst way to pay off your loan.
Why is that?
The remaining amount of money you owe your bank is known as the principal. Let’s say the principal left on your loan is $200,000. You might naively think that no matter how slow or how fast you pay off your loan you’re going to give just $200,000 to the bank by the time you’re done. If that were the case it wouldn’t make much of a difference when you finally paid of your loan.
But your principal isn’t the whole story. You also have your interest rate, which is extra money you pay right to the bank on your loan that doesn’t budge your principle down one red cent. At the beginning of your loan, the majority of your monthly payments are actually interest rate payments and do NOT go towards your principal.
However every extra payment you make over your monthly minimum can be designated to go right to the principal. Which is to say the faster you pay off your debt the fewer monthly payments you make. And the fewer monthly payments you make the less interest you hand over to the bank. And guess what? The less interest you pay to the bank, the less you will pay over the course of your loan. By calculating home mortgage calculator extra payments, you can start to see just how much you can save.
How Much Money Will I Save Making Extra Home Monthly Payments?
Good question! To put it succinctly- you will save a lot of money by regularly making extra payments and not simply fulfilling you monthly minimum obligations. Exactly how much you save, however, depends on a number of factors in the terms of your loans, such as your outstanding principal, your interest rate, and how many months left you have on your loan if you only made the minimum. For most people making even relatively insubstantial extra monthly payments often results in saving thousands of dollars over the life of their loan.
How can you figure out what sort of money you’ll save making extra monthly payments? By figuring out your home mortgage calculator extra payments. By using an online calculator to see what sort of impact paying an extra $50, $100 or $500 on your mortgage will have over the long term. Everything we’ve said in this article is true, but the point really doesn’t get driven home in a serious way until you start crunching the numbers yourself and see how making extra monthly payments to your principal will save you money.