How to Figure the Years to Pay a Mortgage
Most of the time, when you apply for a mortgage the broker or loan officer will tell you exactly how many years it will take to pay down your mortgage. But that is based on regular payments in the amount that he has calculated. In reality, you can pay more money each month to pay off your mortgage in fewer years, which could save you thousands of dollars in interest. Keep in mind that you should do this only if your mortgage terms do not include a prepayment penalty.
Other People Are Reading
Instructions
-
-
1
Determine your interest rate, mortgage principal or balance, current monthly payment, and the length of the mortgage. For this example, let's use a 7 percent interest rate, with a $100,000 mortgage principal and a 30-year term, which equals a normal payment of $665.30.
-
2
Decide how much more you want to pay on your mortgage each month. Let's say for this example you want to pay an additional $200 per month.
-
-
3
Deduct the additional payment amount from your principal balance at the end of each month after making the standard payment. So in our example, on the first payment $583.33 will go to interest and the rest of the payment, $81.97, will go toward principal. (You calculate interest in dollars by dividing the interest rate by 12 for each month of the year, then multiply it by the current principal amount.) The resulting principal balance will be $99,918.03 before the extra payment, and $99,718.03 afterward. The new interest for the following month will be calculated based on the new, lower principal balance.
-
4
Repeat the process for the next month. $99,718.03 times the monthly interest rate (7 percent divided by 12) equals an interest payment of $581.69 and a total principal payment of $283.61 (includes the extra $200 payment). The resulting principal amount will now equal $99,434.42 (to clarify, this is the result of $99,718.03 minus $283.61).
-
5
Do this each month until the principal balance is zero. The extra payment in this example will end up shaving 14 years (168 months) off of your original 30-year mortgage. It will take 16 years to pay off your mortgage in this case.
-
1
Tips & Warnings
For a simpler and quicker way to calculate the years to pay down your mortgage, go to Bankrate's mortgage calculator. After entering your details, you can scroll down a bit and enter the amount of extra money you want to put toward your mortgage. The calculator will spit out the new total in years. Many people make biweekly mortgage payments instead of monthly payments to shave time off of the length of their mortgages. It is like making one additional payment each year. This is an arrangement that you must make with your mortgage company, or else it will just send back your extra payments.
