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How to calculate extra payments to mortgages

Many borrowers want to reduce their mortgage debt by making additional payments on their loans.

To do this, make sure the additional payments are applied toward the principal of the loan and not future payments. You can find this distinction on the payment coupon for the mortgage.

While applying additional payments to principal reduces the total interest paid on the loan, the monthly payment on the debt will not decrease as it does with credit card or revolving debt. The monthly payment will remain the same, regardless of additional payments made.

Check your monthly mortgage statement for the amounts that go to principal and interest. If you have a 30-year mortgage with a fixed interest rate, you will knock seven years off the life of the loan for each extra payment made per year.

Divide your monthly mortgage principal and interest payment by 12. Add this amount to your mortgage payment each month, earmarked for principal reduction. You have just budgeted one extra payment a year.

Multiply your extra monthly payment by two to get the amount you need to pay monthly to cut your 30-year mortgage almost in half.

Set up a monthly debit with your mortgage company to apply extra payments to principal. This will reduce paperwork and make you pay the extra each month. Budget as if you had the higher mortgage payment to ensure that you have enough money for the mortgage each month.

Check with your lender about the cost of a biweekly mortgage. If the option is free, it's an easy way to get an extra payment in per year without stretching your budget. Instead of making one payment a month, you'd make one every two weeks. If you make 26 payments in a year, you'll pay the same amount as you would if you made 13 monthly payments.

Use an online mortgage calculator, such as the one at, to see how much interest you will save over the life of the loan by making additional principal payments.


  • Some people find it easier to make smaller payments each month, while others like to make large lump sum payments on their mortgage. Regardless of the method chosen, the largest impact on the life of the loan and the overall interest paid is in the first three years of the loan. During this time, most of the monthly payment is going toward the interest and not the principal. Even if you cannot afford to continue paying extra per month, if you did it during the first three years, you would see a dramatic reduction in overall interest paid.


  • Many borrowers select a 15-year mortgage to reduce overall interest expense but stretch their budgets to do so. Mortgage lenders suggest choosing the 30-year term option but paying on it as if it were a 15-year mortgage. So in the event of a large expenditure, you can make the lower payment one month and resume the higher payments the next month.