How to Determine Early Mortgage Payoff

So you have a 30-year mortgage and you want to pay it off early by making larger payments. You need to know how soon you can pay off the mortgage with, say, $100 extra per month, and how much less interest this will accrue with the early pay off. This article will show you how to determine the effect of different payment amounts on the timeline for paying off the mortgage and the resulting interest savings.

Difficulty: Moderate

Instructions

Things You'll Need:

• Information obtained in Section 1
• Internet connection and computer
• Calculator

How to Get Your Mortgage Info Together

1. Get your current mortgage information together. You should find what you need or your most recent mortgage statement or bill.

2. Look at your mortgage bill. To find out what you still owe on your mortgage, find "principal balance." This is your remaining balance.

3. You need to know the interest rate you are paying on your mortgage loan. You will find this marked "interest rate" somewhere on the bill.

4. What is your monthly payment amount (excluding any extra payments you are already making)? This would be the "Current Amount Due" on your bill, assuming you don't have a past due amount added into this figure.

How to Use the Loan Payoff Calculator

5. Use the information you obtained in Section 1 with the loan payment calculator. Use the resource listed below and go to the Laon Payoff Calculator site on the Internet.

6. Put your information into the calculator, including the Loan Balance, interest rate and monthly payment you are paying now. Then, hit the "calculate" button. This will show you the months left to payoff the loan with the current payment, and the amount you will pay in interest during this time. Write down both of these amounts.

7. Now, see the effect of paying extra each month. In the Monthly Payment box, add $100 to the amount you are paying now. Then hit "calculate." You will now see how many months it will take to pay off the loan paying an extra $100 per month and the total interest paid. To find out the interest savings, subtract the new interest amount from the amount you wrote down on the paper initially.

8. You can continue to plug in different monthly payment amounts, to see how long it will take to pay off with each payment amount per month and the savings in interest.

9. 
   It will be great to finally own that home, free and clear.

   If you would rather try to find out how much you would have to increase your payments to pay off in x number of months, like 60 months, this is easy as well. Increase the monthly payment amount slightly each time you do the calculation until you get to the desired amount of months for the pay off.

Tips & Warnings

• Many mortgage companies have some sort of payoff calculator on their websites. Generally, however, the mortgage payoff calculators work differently than this calculator. With those, you need the original loan amount, the original loan date, and the amount of years left on the 30 year mortgage. This is sometimes hard to find out. Also, if you've already made extra payments, the calculator is inaccurate. So, I used the calculator in the Resources section instead.
• If you prefer to use a regular mortgage payoff calculator, you may need to call your bank to find out the original loan amount and date, as well as how many months you are into your loan. This is not often provided on your mortgage statement.
• You don't need to get sucked into the offer by your mortgage company to enroll in the biweekly payment plan to pay the mortgage off early and save money. It generally costs hundreds of dollars to enroll in this plan. All you need to do is add more to the amount you pay each month!

Resources

• Loan payoff calculator

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on 3/11/2009 Microsoft Excel has a really useful mortgage calculator template. You can enter all kinds of different additional principal payment amounts in lots of places. I made a demo of how it works at www.yourtwobits.com.